us stock market, trend trading stock

- Market ends a down week with NYSE large caps struggling, technology showing relative strength, and leaders holding the line nicely.
- Bear Stearns sub-prime issues show the housing market is still not done with its troubles.
- Leaders are holding the line as NYSE large caps again test key levels.

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

Chart by StockCharts.com

Company Profile
We love playing strong leaders of strong sectors because they are attracting money, and when they break out they make rather predictable moves that we can play again and again until the move signals it is running out of gas. SLB is one of those leading stocks in a leading sector, and it broke out from an 11 month base in early April.

It rallied on that breakout, tested back to the 10 and 18 day EMA, then rallied again before pulling into another consolidation from late May to mid-June. We played that mid-May break higher as the stock moved higher off a 4 week lateral consolidation at the 18 day EMA. We bought into that break on 5-16-07 with some stock at $76.52 and some August $75 strike call options for $5.80 per option ($580/contract). The next day SLB broke higher for a $2.21 gain. It added a couple more dollars over the next few sessions and then worked laterally on into June. As it was showing good price/volume action, we let the position hold as it set up its next move, holding near support at the 18 day EMA. It broke higher again on 6-11-07. It rallied $6.70 over the next two sessions, pushing our options up to $10. We sold some of our position, banking a nice 72% gain ($420/contract). Not bad.

We liked the action so much after that initial play started that once we saw SLB start to move laterally again we put a new play on. After moving into the next consolidation we were looking for another buy point as it again came off the 18 day EMA. It did that on 6-4-07 and we bought some more stock for $80.25 and some August $80 strike call options for $5. As outlined above, SLB surged higher and on 6-15-07 our second options were trading for $7.70, a 54% gain ($2.70/contract). We let the positions run, and after a 4 day lateral move SLB broke sharply higher again on Friday, posting a $3.44 gain. That really juiced up our option positions. The August $75 strikes are trading at $13.20 (+127% or $740/contract). The August $80 options are trading at $9.10 (+82% or $410/contract). The stock positions are trading with 16.5% and 11% gains, respectively.

We really like averaging up into winners as they set up again and again after their breakouts. What better way to play a strong move than to latch onto winners in winning sectors and buy in when they give you the buy opportunities? We can typically play these moves 4 times on the breakout and that gives us a lot of opportunity for a lot of profit. It is never the case where there is just one buy point and if you miss it you miss out. No, even the big winners give you several opportunities to make excellent money if you know what to look for and when to move in. We are experts at that.

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.

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

Chart by StockCharts.com

Company Profile
EARNINGS: Announced 4-26-07
STATUS: Test 50 day EMA. VSEA moved up Friday on tremendous volume, but we know what we can do with that. The more important feature is the excellent pullback to test the 50 day EMA that has set up a run higher. If this move from Friday continues we are ready to move in. To recap: A nice winner for us earlier in the year, VSEA has fully filled its last gap higher from late April, the exhaustion gap on that move. With the chips starting to move we are looking for VSEA to start a move off of this support and resume its role. Volume was up close to average Thursday as it bounced up off the 50 day. Want to see some strong volume as it continues higher.
Volume: 12.924M Avg Volume: 2.26M
BUY POINT: $41.38 Volume=3M Target=$48.95 Stop=$39.25
POSITION: USJ KH - Nov. $40c (57 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.