us stock market, trend trading stock

- Volatile session, chock full of positive and negatives, marks the end of the quarter and a trying month.
- Core PCE is now inside the Fed's comfort zone, and indications are it will continue to do so.
- Bond rates veer lower on a Friday flight to safety, but they were already trending lower after that mid-June peak.
- New quarter, new money, but a shortened holiday week may set the calendar back.

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

Chart by StockCharts.com

Company Profile
EARNINGS: Announced 5-16-07
STATUS: Cup w/handle. CTRP is on quite a run; it has been since it went public. Friday it broke higher on a strong shot of above average volume, the best traded in two weeks, as it cleared the mid-June highs marking the breakout point from its 6 week base. Nice pattern that formed over the 50 day EMA, using that level as support. It formed this pattern immediately after the mid-May break from a 15 week base. Looking for a new all-time high on this run and we are looking to move in as CTRP continues its run higher.
Volume: 420.603K Avg Volume: 299.068K
BUY POINT: $78.92 Volume=450K Target=$90.95 Stop=$75.88
POSITION: QCT IO - Sept. $75c (68 delta) or QCT LP - Dec. $80c (47 delta, 180 OI) &/or Stock

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).

Pre-announcements are where we put in the long hours of research, chase down leads and rumors, and pump our contacts for information in order to determine if a split is in the works and to pinpoint an announcement date. Pinpointing the date is our primary goal as this allows us many more options in how we play a split. As we primarily focus on leadership stocks in good technical patterns, if we see the stock make the breakout we will get in earlier and ride the wave of speculation up to or through the announcement. Pinpointing a date and time also allows us to open positions immediately prior to an announcement, minimizing our exposure time to the market whims. We employ this strategy regularly in a number of situations. When we have ridden a stock for a few days, a week, a few weeks, up to the forecast announcement, we often have a lot of profit built in. After all, these are leaders and they attract attention moving into earnings, shareholder meetings, etc. We often sell some positions (all or a partial), lock in the profit, and take positions with higher strike call options near the current stock price at a cheaper cost if the stock is not overextended, i.e., has done all of its running before the forecast announcement. This way we bank some profit from the early run, and take some of that profit to play the actual split. Even if the board pulls a fast one on us and does not announce, we still have profit in the bank. This method also works well when the market is choppy, and we do not want to hold positions long. We can often buy right before the announcement and then sell when we feel the split announcement has run its course and the stock starts to pull back. Narrowing the predicted date and time of the split gives us these options.

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

Chart by StockCharts.com

Company Profile
The trade for the week has to be RIMM. When you get that kind of movement everyone notices. But it started before the 3:1 split and strong earnings Friday. We were watching RIMM form a nice lateral flying plateau in late May and early June as it consolidated a breakout and run higher from early May. This kind of lateral move where the stock refuses to give up ground is what you like to see as it tells you no one is selling. We put the play on the report on 6-6-07 as RIMM tested the 10 day EMA on low volume, making that lateral move. It continued to test the 10 day, but three sessions later volume jumped above average and RIMM jumped off the 10 day EMA.

That was the movement we were looking at to start positions. We bought some September $170 strike call options (the stock was at $170.35) for $15.30/option. Kind of pricey, but when you run with this kind of volatile, fast moving stock you have to pay a bit more. Over the next week RIMM moved higher but it only made it into the 176 range. It looked solid but then the AAPL news came out about the iPhone's battery life, and with the upcoming release on 6-29 that started to weigh upon RIMM. It sold back over the next week ahead of the earnings and the iPhone release.

We knew RIMM's earnings were going to be strong and we also were pretty sure it was going to announce a split, so we move in with more positions ahead of the earnings report, adding to our options at $12.40 just ahead of the announcement. We all know that RIMM did blow out its numbers along with the 3:1 split. That gapped the stock sharply higher and with such a strong move on such good news we knew we needed to take at least some of the money off the table. We sold some options for $32.50; that is a 112% gain on our higher priced options, or $1,720/contract. It was easy making the sale after the earnings were released. The harder part for many was moving in ahead of the earnings. By our metrics, RIMM had a great report to come and the split would be icing on the cake. It certainly was.

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