world stock market, us stock market

- Economic data, new money help close out a solid week.
- Growth, yet lower inflation: there you go again.
- After a strong surge off near support the indices could use another rest.

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

Chart by StockCharts.com

Company Profile
WNR was a big winner for us from February to March when it broke out from a 12 week base and rallied 12 points. That gain netted us 39% on our stock positions and 200% on our options. It then went into a base and we put it on our watch list; we always watch those stocks that are nice winners for us as they base just so we can be ready when it sets up for its next move.

Well, as it turns out WNR started to form the identical base it scratched out from December to early February, just a bit shorter. I mean it was almost an overlay of that pattern. Needless to say we put it on the report on 5-15-07 and just waited for WNR to show us the move.

It did not take long. On the fourth session WNR broke sharply higher on a big volume surge. That was what we wanted as that showed the buyers were piling in to buy the shares as it cleared resistance. We bought some stock positions at $42.45 and some September $40 strike call options at $6. The power of the breakout was pretty exciting, and with WNR in the oil and gas refining business, we anticipated another strong run. It put in almost 2 points that first breakout day and added a bit more over the next two sessions, but stalled the following. It fell to test the 10 day EMA, but it held and volume was low, so we let the play run. It was still above our buy point so we gave it some room to work.

Glad we did. On 5-29-07 WNR exploded higher for $3.63 on some humongous trade. It added $2.97 the following session on some more outstanding volume. Took a breather Thursday, understandable given the explosive move. The stock was near $50 on the high and our options were bidding $10.80, a crisp 16% gain on the stock and 80% on the options in 8 sessions. WNR was not done, however, rallying another $2.60 Friday. Volume was lower, however, the lowest of the run. With a good week behind it, taking some gain was prudent though with such a strong run underway we always want to keep some to work higher for us. That worked out to 21% on the stock and 106% on the options ($12.40, or $640 per contract). In addition we still have a strong stock running for us. That is why we always watch leaders that have made us money and then slip into a base for some R&R. When they set back up they can provide us with a repeat performance just as WNR is doing.

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).

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.

Listen to Stock Split Report Editor Jon Johnson's
stock split interview on CNBC-TV [  Broadband  |  Dial-up ]

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

Chart by StockCharts.com

Company Profile
STATUS: Flying plateau. GILD continues to set up nicely in its 6 week lateral trading range that is working along the 18 day EMA (82.42), holding that near support on mostly low volume. Setting up nicely and showing some rising volume last week as GILD moved up off a test toward the 50 day EMA on an intraday low. Money flow remains strong, and with that volume starting up we are on watch this week for the breakout from this range.
Volume: 2.362M Avg Volume: 4.149M
BUY POINT: $84.38 Volume=6.5M Target=$94.95 Stop=$81.89
POSITION: GDQ HQ - Aug. $85c (53 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.