world stock market, us stock market

- Economic data helps stocks stage a decent, albeit low volume rebound.
- The moves early this week will be the market's direction for the next leg.
- October surprise, albeit short term, may be in store.

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

Chart by StockCharts.com

Company Profile
Whenever certain sectors start getting money poured into them you have to look their way and start putting your money to work there as well. Copper, oil services, large cap technology and . . . shipping. Not trucking, not rails, but overseas shipping. The US is shipping tons more exports and the rest of the world is demanding more goods and materials for their infrastructure build-out and personal consumption. There are not enough ships to go around. That means boom time.

The patterns have shown the moves. We moved into DRYS and made a lot of money. We also looked at the less known and indeed lower priced shippers and found some gems. DSX was one such gem. In September we saw it setting up a reverse head and shoulders pattern. We put it on the report on 9-22-07 after it showed a volume move off the 50 day EMA. The next session it gapped higher and we moved in with some stock positions at $27.98 as well as some March $25 strike call options at $5. When we see this kind of volume kick up in a good pattern in a good sector we like to focus in on it. Play the stock and options is one way to do that.

The surge in volume indeed indicated a strong move to come. The next session the stock was up $1.13. The following it gapped higher but reversed to close lower, giving back the prior session's gain. Kind of nerve racking, but a strong pattern and a strong breakout, so we did not panic out of any positions. It recovered and was up $1.25 the next session. Two sessions later it added $2.06 to $30.56. A modest test over the next two sessions, then another surge as DSX climbed to $34 on 10/10/07.

That pushed DSX to our initial target and we sold some stock at $33.95 for a 21.3% gain. We also sold some options at $9.40 for an 88% gain or $440/contract. Excellent returns for just over 2 weeks in the play, and just more confirmation that you always need to look at where the money is flowing, look for stocks that are in patterns ready to break higher, and when they start the move, you focus on them and put your money to work in them.

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.

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

Chart by StockCharts.com

Company Profile
EARNINGS: 10-30-07
STATUS: Double bottom w/handle. Nice tight hammer doji on the 10 day EMA Friday on very low trade as BWLD continues to set up for the strong break higher. Great pattern and ready to jump all over this one. To recap: A big runner in late 2006 and early 2007, BWLD needed a breather after the move and has spent the past 20 weeks forming a new base to lay the foundation for a new breakout. Nice volume as it bounced to start the month and now a low volume fade to form the handle, Thursday closing right at the 10 day EMA on continued below average volume. May take a couple more sessions to finish the handle, and we are looking to move in as BWLD rebounds and shows us the breakout.
Volume: 189.032K Avg Volume: 538.503K
BUY POINT: $42.22 Volume=800K Target=$50.65 Stop=$39.95
POSITION: BQU CH - Mar. $40c (52 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.