us stock market, trend trading stock

- Jobs report splits the baby, sort of, and stocks find no reason to rally or sell.
- Interesting and positive features in the jobs report, but nonetheless it ensures a Fed cut.
- Funds Futures contract predicts 25BP, at least according to the 'old' Fed.
- A new bottom, highs by year end, or a bouncing in a larger selloff. Take your pick, but be prepared for either.

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

Chart by StockCharts.com

Company Profile
During the early November selling the market was pretty grim. The indices were selling off hard, posting 10% losses from their October highs, breaking through their 50 day and 200 day SMA. Some of the stocks that led the prior rally higher, however, though they did sell back, did not violate their key support levels. That shows underlying strength remained in these stocks, and we wrote about that in the report as we put these leaders on the report.

MON was such a stock. A big runner in 2007, it enjoyed a strong run from September through early November and then sold back with the market. It held its 50 day EMA, and as we saw NASDAQ 100 holding up and many of these leaders doing the same thing, we anticipated an upside rally. On 11-27-07 it bounced off the 50 day EMA and we put it on the report. The next session MON exploded higher on the best volume in three weeks. We bought into the move with some stock positions at $93.50 and some January $90 strike call options, paying $8.60 per option ($8.600 per contract).

The stock was a monster that session, closing at $99.11. After such a move it stalled the next session, taking a breather on lower volume. We held fast to let the move make its run. It added $1.20 the following session, then $2.24 the next. A day off then a $3.42 session followed by another $1.61 the next. On 12-6-07 it hit our initial target at $105.95, a 13% gain. The options were bidding $17.50, a nice 103% gain or $890/contract.

The key to this play was nothing special, just paying attention to what the leaders were doing, noticing strength, and recognizing that it would try to make another move and being in position to act when it occurred. Many other stocks performed similarly, e.g. GOOG, AAPL, VIP, ISRG, FSLR, etc., and these were all on our report and all have given us some great gains on this holiday run. Again, watch what the leaders are doing as they will give you the best insight as to when the next move, up or down, is coming.

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: Mid-January 2008
STATUS: Double bottom with handle. NE has formed a short 4 week base over the 90 day SMA as the tail end to a larger 5 month ascending base. It is setting up nicely for a break higher but as with many energy stocks last week it had no volume on the week. Nonetheless it has set up a good pattern and now we look for volume to jump up some as it makes the break higher and gives us the entry point.
Volume: 2.883M Avg Volume: 4.562M
BUY POINT: $54.36 Volume=5.2M Target=$62.55 Stop=$52.22
POSITION: NE CX - Mar. $52.50c (62 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.