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- Stocks bounce as shorts cover heading into the weekend.
- Is the bond rate spike artificial as well?
- Trade deficit drops unexpectedly as strong world economy and even the weaker dollar have their impact.
- Plenty of leaders in position to bounce but the selling has not yet shown its climax.

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

Chart by StockCharts.com

Company Profile
When the market is moving well you have to look for leaders setting up to break higher and be willing to pony up, i.e. act on it, when they flash the 'buy me' sign. MA was doing this in late April as it traded in a very tight, low volume range at the end of a 3.5 month flat base that formed over the 50 day EMA. A big mover in 2006, it needed the base to consolidate and set up the next move. The flat, tight range in May and the low volume was a classic set up for a breakout.

It broke higher 4-27-07 and we issued the buy alert, picking up some shares at $113.88 and some July $115 strike call options at $6.80 per option ($680/contract). That day MA shot higher by $5.54 points and on a big jump in volume, the best in almost two months. That volume and the break higher told us that the big buyers suddenly wanted more of MA versus just accumulating it steadily as they did during the base. The next day it jumped again, running to $118 on the high, but then it reversed and closed lower. Trade was still strong and we did not like the immediate turnaround after the break higher. If it continued to sell we might have to close it fast. Instead it bounced up over $3 the next session. The move was on.

The next session on 5/02 it gapped higher and closed up $11.50. Good things happen to stocks showing strong accumulation and good patterns. It was not finished, however. MA added $8.47 the next session. After that it was a steady move up the 10 day EMA, working laterally in mid-May, forming a modest flying plateau. On 5-29 MA broke higher again, gapping up and posting a $5 gain, then a $3 move and a $2.42 move though that session closed 4 points off the high. That put us on alert that this big run may have lost some strength. It moved laterally the next two sessions and then stumbled on 6-05, dropping to the 10 day EMA intraday. We decided to take some gain off the table as it rebounded. We sold some stock for $148.52, a 30.4% gain. We sold our options for 34, a sweet 400% gain ($2,720/contract). MA subsequently struggled in the market selling, but if it sets up another good buy point we will once again look at taking positions on this strong market leader that can charge in any situation.

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.

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

Chart by StockCharts.com

Company Profile
EARNINGS: Announced 5-1-07
STATUS: Test 10 day EMA. Quite a surge for MRO in May has made us a sack full of money after it broke higher from a 6 week flat base to start that month. It peaked on the move a week back and made a very nice, orderly test of the 10 day EMA (123.37) last week. Volume was above average on the Thursday selling, but it held and is in great position to move toward its split with another good burst higher.
Volume: 3.36M Avg Volume: 4.137M
BUY POINT: $125.75 Volume=4.5M Target=$144.95 Stop=$121.89
POSITION: MRO JZ - Oct. $125c (52 delta)

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