us stock market, trend trading stock

- A Fed in the shadows keeps the sellers away, allowing stocks to sprint higher to close a rebound week.
- Recession or Inflation? Eco data remains solid with some spectacular and some rather unspectacular results as recession talk ratchets up.
- Letting this rebound run as far as it will though low volume climbs tend to lead to lower.

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

Chart by StockCharts.com

Company Profile
We like to play leaders, and we like to buy into them anytime they give us a good entry point to do so. BCSI is a stock that has made us money time and again during its runs the past year. It made us great money in a May to June run and then again in June to July. After those runs it needed a base, and when we saw it setting up once more in August we prepared to move in, putting a play on the report.

It broke higher on 8-7 as it came off a test of the 50 day EMA. After a breakout and run higher up the 18 day EMA, a stock will test the 50 day EMA to reload and start the move anew if it remains strong. We look for a high volume break upside off the 50 day to enter, and on 8-7 BCSI showed us that. We moved in with stock at $52.97 and some October $50 call options at $8. Just about that time the market hiccupped, but though BCSI sold back some it also held support at the 50 day EMA, setting up something of a double bottom. We were not deterred, and given its strength we wanted to pick up some more positions. We put another play on the report, and on 8-20 when BCSI cleared the short double bottom we bought in again with some stock at $57.81 and some January $55 call options at $10.60. That was just a day ahead of earnings, but with the companies growth rates and the strong action heading into the results, we anticipated some great news.

The stock rocketed higher on the earnings. We sold some of our January options for $19 (79% or $840/contract) and some of the stock for just over $70. We sold some of the October options for $21.80 (172% or $1,380/contract). The stock continued higher Friday, closing at $84.99. The October options closed at $35.10, a 338% gain ($2,710/contract). The January options closed at $32.20, a 203% gain ($2,160/contract). We will continue to ride the remaining positions as long as the move higher, but after such a move we will be wary of a gap higher and then a reversal that takes it below the prior close. That is the time to sell out your remaining options. At these prices and with quite a few contracts, we don't need to be greedy. Such is the power of watching for leaders in earnings growth rates and with strong technical positions. The returns are impressive.

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: 9-27-07
STATUS: Breakout test. After a plunge during the selling that took RIMM below its 50 day EMA, RIMM bounced right back, moving past the old high and breaking to a new one. Unlike the rest of the market, volume was not light; volume surged as RIMM jumped right back up. It peaked Wednesday and reversed, fading into the Friday open. After another lower open to end the week it rebounded to close positive. It may not test anymore. Ready to take positions as it continues higher from here. If it fades some more, all the better; we will look for a test toward the 10 day EMA (77.20) and adjust the buy point accordingly. In other words, if it fades toward the 10 day EMA and then starts to bounce we will move in as it starts higher.
Volume: 13.084M Avg Volume: 25M
BUY POINT: $82.55 Volume=30M Target=$99.00 Stop=$77.11
POSITION: RFY LV - Dec. 83.38c (48 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.