us stock market, trend trading stock

- Short base but good leadership.
- Existing home sales grow but economy still showing a mid-cycle slow down.
- Gasoline prices lurking in the shadows.
- Ready to play the run to the prior channel but cautious as to what it does from there.

Here's a trade from "The Daily" and insights into our trading strategy:

Chart by StockCharts.com

Company Profile
It is hard to top the combination of solid fundamentals growth rates and a technical pattern that shows continued accumulation. You do it by finding the right entry point for the stock that delivers you fat gains over a relatively short period of time.

WFR is one of those stocks. It is a chip so many were not paying attention to it with the emphasis on energy, metals and the like over the past couple of months as the market corrected. WFR, however, hung in there and with it showing great technical action we zeroed in on it. It broke out from an excellent 9 month cup with handle base in late January and rallied 10 points to 55. That was a nice move to play, but we always look for additional entry points on strong stocks in order to focus our money on the strength of proven winners. WFR tested the move with a fade to the 50 day EMA to end February. It held the line at that key support and bounced on 3/6/07. We put it on the report that night. WFR continued the move the next session and we took some stock positions at $54.48 and some July $55 strike call options as well.

The reason we moved in again at this point is because after a strong breakout and move higher a stock will come back and test support, typically the 10 or 18 day EMA with occasional dips to the 50 day EMA. With the market selling WFR did come back to the 50 day EMA, but that hardly damaged the pattern, particularly as the selling was on relatively light volume. Thus, when it started back up we were ready to take more positions.

The next session WFR gapped higher, matching the late February highs. It then consolidated for seven sessions at that level. It did not sell back below near support at the 18 day EMA and volume was low, so we let it take its time and set up for the break higher. Sure enough, on 3-20 it blasted higher on huge trade, rallying $2.84. The next session it added $3.81. It took a breather after about $6.50 in gains, but the next session it tacked on $3.44. Still going strong, but after an explosive move we decided to bank part of the gain. We sold part of the stock at $63.45 for a 16% gain and part of the option position for $11.70, a 91% gain ($5.60/contract). With WFR still surging we are going to let the rest of the position run as high as it will for us and then bank some more option gain and decide if we want to let the stock position test and then look for another entry point.

Learn more about "The Daily" with Stock Picks! - Issued 5 Times Per Week

Playing stock splits can be very profitable, but it takes know-how. Our stock split service focuses on three main types of plays:

1) pre-announcement (where we forecast an upcoming split prior to the company making the announcement); 2) pre-split (these plays are made in the days leading up to the actual split day); and 3) post-split plays (plays made after the actual stock split where the stock is showing continued or renewed strength).

For post-splits, we can play them as we would pre-splits (very short term), but we prefer to stretch our horizons, playing the trend. When playing options, we look further out, 2 or more months at least. We let the trend carry us along if there is one, but we will also take profits if the technical pattern degenerates, e.g., breaks a trendline. The main difference between post-splits and pre-splits plays is that we really have to like the pattern. Pre-splits can run right before their splits even with poor technical indicators. For post-splits, we are looking at the stocks from more of a longer term "would I buy this stock at this juncture?" position. Now there are times when a hot stock splits and investors pile in to get in while the stock is 'cheaper.' We play those, but with more of a short-term, pre-splits mentality in that we will be ready to get out fast if the momentum fades.

Remember, everything we do has to pass muster with the market that day ... don't fight the market on these plays.

Here's a post-split play and our current analysis.

Chart by StockCharts.com

Company Profile
EARNINGS: Announced 2-14-07
STATUS: Ascending base. Gapped higher in mid-February on earnings and the split announcement. That tapped it out of a 4 week lateral range, but it still needed more consolidation and formed the current 6 week pattern, making higher lows up the 18 day EMA (40.85). Strong money flow continues to lead higher as GES tightens up, building pressure for a new all-time high. Solid and ready for more upside.
Volume: 771.7K Avg Volume: 1.576M
BUY POINT: $42.22 Volume=2.4M Target=$48.95 Stop=$40.68
POSITION: GES FH - June $40c (72 delta) or GES IV - Sept. $42.50c (59 delta) &/or Stock

Learn more about our Stock Split Report and how we have made gains of 321% with our powerful stock split plays!
Details Here.