us stock market, trade stock

- CPI delivers the goods, market delivers a follow through.
- A bevy of strong data as CPI, New York, PMI, Current account offset a gas-burdened Michigan sentiment report.
- China tariff update: Senate trying to start a trade war with China, but as usual they are playing politics over what is good for most US citizens.
- From the brink of a breakdown to short term overbought: the momentum has shifted but there is still more to prove.

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

Chart by StockCharts.com

Company Profile
When the market is rallying it is hard to go wrong with leading stocks in a leading sector. Those stocks often ride through rough patches that the rest of the market suffers. CRZO is a case in point. It is a stock we have traded and invested in for some time, and thus we keep an eye on it each time it sets up for a new run higher. In late May CRZO was pulling back from a nice bounce off the 50 day EMA, coming back to the 10 day EMA to test that move. We put it on the report on 5/24/07 and waited for the test to end and yield a bounce higher to show the buyers were back in.

We did not have to wait too long. It showed a doji at the 10 day EMA the next session, and the following session it gapped higher on rising trade. That was our signal to enter and we bought in with some stock at $39.35 and some October $35 strike call options at $6.70/option or $670 per contract (100 options). With a 72 delta (the option moves $0.72 for every $1 move in the stock), any solid move in the stock would return a nice gain.

That first session CRZO gained $1.09. The next it added $1.16. It paused but did not give anything back for two sessions and then added $2.40 over the next three sessions. It then faded modestly for a couple of sessions. That was during the sharp sell off in the overall market, but CRZO gave back just 69 cents. That is the power of buying leaders in leading sectors; they tend to shrug off the hiccups that impact the rest of the market. CRZO then added $2.70 over the next three sessions, hitting our initial target. Sticking with our plan we took some of the gain, selling some shares at $45.63 for a 15.9% gain and selling some options at $11.90, profiting $5.20 per option or $520 per contract (a 77.6% gain). We are letting the remaining positions work for us, and Thursday and Friday CRZO added another $0.91. We will let those work for us as long as they will.

We love sniffing out the leaders in a sector because they are not as volatile as the followers that don't have the strong earnings and strong following that will ride through the market gyrations. We focus on leaders for all of our plays because the pay off is that much better.

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
STATUS: Test 18 day EMA. Gapped higher Friday on some strong volume, but it closed well off the high so we did not bite. It held above the 10 day EMA (33.67), and if it continues higher we are looking to move in. To recap: After breaking out from an 8 month base in February, FLO has made a steady climb higher up the 50 day EMA. It is setting up for its third run higher following the breakout, this time holding higher than the 50 day EMA. Volume jumped higher and back above average Thursday as FLO started back up. Very nice action that looks ready to resume the pre-split run.
Volume: 424K Avg Volume: 314.565K
BUY POINT: On a continued move from here (orig. $33.78) Volume=400K Target=$40.55 Stop=$32.89
POSITION: FLO JF - Oct. $30c (70 delta, low OI) or FLO HF - Aug. $30c (70 delta, low OI) &/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.