us stock market, trend trading stock

- Jobs report not too hot, not too cold and stocks cap another upside week.
- Solid week of economic data, and the lagging jobs report doesn't change that. Indeed, ECRI says things continue improving.
- Sentiment still has negative aspects even with the market gains (short interest remains high).
- Earnings season hardly over, but the impact softening as market looks toward what is next.

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

Chart by StockCharts.com

Company Profile
Sometimes the pickings get a bit easy. With all of the outsized upside earnings surprises in the market we were looking for stocks that were in great patterns, that we anticipated would have good results, and had analysts worried. MA fit the bill because of a great pattern and worries from analysts that a weak housing market would cause the consumer to pullback while we thought earnings would be good because the economy is better than most think (see our economic review).

We had MA on the report in anticipation of this and also because its pattern had gone dormant for over three weeks. Very tight daily and weekly trading range and very low, below average volume. No one was selling, just quietly buying. Thus when we saw MA break higher on 4-27 we were ready and we moved in with some July $115 strike call options, buying them at $6.80. The stock was at $113.88 and closed the session over $114; a good initial move for the play.

It tried to extend the next day but reversed. Volume was lower so we stayed with it given the strong pattern and the breakout. Sure enough it rebounded the next session just ahead of earnings. Well you know the story. Earnings were indeed excellent and MA gapped higher for an 11.50 point gain on 5-2-07. The options jumped to $14.50, a 113% gain. It was not done, however. As we have seen with other such set ups to earnings, the move is not just a one-day wonder. Patience paid off and on Thursday MA erupted for another $8.47. Very nice. Still we wanted to see if MA would continue further. Friday it did, but after a modest gap higher it started to peel back. That is a classic signal that a short term, explosive move is tired. It was worth locking in some gain with the options trading at $21.60, a 217% gain ($1,480/contract).

The strength of the pattern was enough to get you into this play. The other factors only put exclamation points after it. When the market is giving it, be sure to be taking it!

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: 4-18-07
STATUS: Test breakout. Started the move higher Friday though volume lagged. Just want a bit more trade as it continues, but it is likely to come in. Thus on a move higher we are looking to take at least a partial position. To recap: APH broke higher last week on strong volume, surging out of a 22 week base that set a great foundation for the move. It rallied to $36.54 on the high and then faded to test, gapping lower Monday but on much lower volume. APH is holding near support at the 18 day EMA on the lows. Looking for a rebound on continued solid trade to start the play.
Volume: 1.084M Avg Volume: 1.119M
BUY POINT: On a continued move higher (orig. $36.07) Volume=1.7M Target=$41.95 Stop=$34.95
POSITION: APH GG - July $35c (56 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.