- A quiet Friday. - Market action: Building for an upside move or staggering for another fall? - World economic indicators as mixed as ever. - Subscriber Questions. See full story.
Be sure to read our Stock Splits Manual. 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).
We play pre-split plays as short-term plays. We get in when the technical indicators show us things look right, grab as much as we can, and get out, always being conscious of resistance and support. These stocks are highly volatile at this time, and can turn on you quickly. Don’t let good profits disappear. Watch for turns, especially when a stock trades in a wide range and finishes off its high. That is a sign these stocks often give you that they are running out of steam. We usually get out and ask questions later. We can always get back in. We like to play in the money calls, preferably two strike prices in the money as this usually gives us a greater delta (the percent an option will mover versus the stock’s movement). We prefer deltas of 75 or better. This means if the stock moves 1 point, the option should move three-fourths of that point. That means up or down.
Remember, wait to see the stock start to move up. Don't just blindly make a play and don’t try to guess tops and bottoms. We can look at indicators to give us a clue as to what will happen, but we need the stock to confirm it for us. Here's a pre-split play to watch and our current analysis.
BLL BLL (Ball Corp--$73.29; +1.97; optionable): Packaging & containers. Splits 2:1 effective February 22.
Company Profile STATUS: What a move! Since announcing its split BLL has rambled back up from the 65 level (below its 50 day MVA, which is currently at 67.60). Friday is made its third consecutive impressive gain, tapping a new high at 74.43 before pulling back to close. Volume was down but remained very strong at 459,600 (average 256,000), but we need to watch BLL for a rest or pullback after having dipped back below its prior high (74, from early January). We will see if it can hold 72 on a dip back on lower volume and set up another pre-split surge that will take it to a new high.
PLAY: After pulling back and holding 72, a move over 74, with stock and/or March $70 calls to buy (BLL CN - under 100 open interest).
TROW (T. Rowe Price--$36.35; +0.16; optionable): Financial
Company Profile STATUS: Financials are holding up well. Earnings were out Friday morning, and though they came in just below estimates, the stock held its ground at the 18 day MVA (35.99), moving up from the support on rising volume (608,200; avg. 584,000). TROW is in the handle to a 22-week cup with handle, and looks ready for a move back off the 18 day MVA here. This will be the stock’s third bounce from the support level since it launched from the 50 day MVA in early December, a move that broke it out over the 200 day MVA at the time. Showing strong money flow and high relative strength. Target: 45
BUY POINT: Aggressive: 36.65 on above average volume. Stop: 34.08 (7%). Cup with handle breakout: 37.75 on volume of 876,000 or higher. Stop: 35.11 (7%) POSITION: Stock and/or April $35 calls to buy (RQW DG).
IKN - Ikon Office Solutions is currently trading at $12.85. The March $12.5 Calls (IKNCV) are trading at $0.85. That provides a return of about 4% if IKN is above $12.5 on expiration Friday in March.
Company Profile
Malaysian stocks closed higher on Friday, snapping a four-day losing streak, as upbeat comments on the health of the U.S. economy encouraged buyers.
Among the gainers were chipmakers and telecom stocks, rebounding from recent steep declines triggered by news that Maxis Communications, the country's biggest cellular network firm, was planning a mid-year initial public offer.
(This IPO story is continued on our website in the IPO Forum.)
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The foregoing is commentary for informational purposes only. All statements and expressions are the opinions of Online Investment Services, LP., or Split Ventures, Ltd. This information is not meant to be a solicitation or recommendation to buy, sell, or hold securities. We are not licensed or registered in the securities industry. The information presented herein and on the related web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolios of writers for this issue may, in some instances, include securities mentioned herein and on the related web site. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future developments may differ materially due to many factors. No one asscociated herewith receives compensation in any manner from any of the companies that are discussed in this newsletter or on the related websites. Click Here For Weekend IssueSwitch To Text VersionChange Your Email AddressUnsubscribe
