us stock market, trade stock

- Employment report confirms economic plunge, Fed & administration remain indifferent, market responds in kind.
- Job creation not negative but it may as well have been.
- Fed is in a tough position, but doing nothing for fear of inflation definitely won't help.
- Positives: valuations are reasonable, fiscal stimulus will eventually pass, global economy will survive, and that equals a shorter economic hiccup.
- Market getting short term oversold as NYSE indices approach natural support at the November low, but a bounce is not likely to change the market's character.

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

Chart by StockCharts.com

Company Profile
You always have to be looking for the trends and what the market is giving away. It doesn't have to be hard; you look for strength in a weak market, weakness in a strong market, strong technical patterns in stocks with strong fundamentals - the things that stack the deck in your favor.

Semiconductors have lagged for more than a year, and have really struggled the second half of 2007. They rebounded in December, but we saw the chip indices stalling at the 50 day EMA as they rebounded; classic sign of weakness. We also saw NASDAQ start to erode internally last week. It had been the holdout, one of the areas of strength left in US stocks. When it started to cave we knew the chips would do the same. Thus we looked for a downside play by a sector that was weak in the strength.

We saw it test the 50 day EMA and fail. We put it on the report over the weekend, looking to move in with some put options to play the move downside we felt was coming after this failed test of the 50 day EMA. On Monday 12-31 the SMH (semiconductor ETF) gapped lower but did not sell. With that action we waited to see what the next move would be off of the gap. Turns out it was down as we anticipated. We moved in with some February $32.50 strike put options, paying $1.38 per option ($138/contract). We were looking for a move below the prior low given the weakness shown at the 50 day EMA.

SMH closed $1.10 lower that session. Thursday it fell another $0.55. Friday of course it tanked on another INTC downgrade and the jobs report. It blew through our initial target at $30.45 on the way to a close at $29.25. With three consecutive sharp moves lower on the heels of three prior downside sessions we figured it was time to take some gain. We sold part of our position for $2.90 per option. Doesn't sound like a lot, but that was a 110% gain in a couple of sessions. With the price of these options we loaded up, and that was a mighty nice return indeed.

While we still see a lot of possibilities in energy (banked a 22% gain on PZE Friday), agriculture (we banked some strong 74% gain on MOS last week as well), foreign telecom, etc. and will take advantage of those still. When the downside set ups are there for the taking, however, we don't hesitate to take 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).

We play pre-split plays as short-term plays. We get in when the technical indicators show us things look right, grab as much as we can, and get out, always being conscious of resistance and support. These stocks are highly volatile at this time, and can turn on you quickly. Don't let good profits disappear. Watch for turns, especially when a stock trades in a wide range and finishes off its high. That is a sign these stocks often give you that they are running out of steam. We usually get out and ask questions later. We can always get back in. We like to play in the money calls, preferably two strike prices in the money as this usually gives us a greater delta (the percent an option will mover versus the stock's movement). We prefer deltas of 75 or better. This means if the stock moves 1 point, the option should move three-fourths of that point. That means up or down.

Remember, wait to see the stock start to move up. Don't just blindly make a play and don't try to guess tops and bottoms. We can look at indicators to give us a clue as to what will happen, but we need the stock to confirm it for us.

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

Chart by StockCharts.com

Company Profile
STATUS: Cup. After the strong Thursday move BTJ faded Friday back to the 200 day SMA where it held fast. Volume was lower so no dumping. Got a bit of a test of that strong break higher over the 200 day and now it is ready to move. To recap: BTJ started higher this week from the bottom of its 7 month cup base, breaking up through the 200 day SMA (40.63) Thursday with a strong price and volume surge. BTJ was a nice winner for us the first half of 2007, and this long base has allowed BTJ to consolidate those gains and set the foundation for a new rally. Looking to start moving in as it continues this move. We are playing the pre-split run but also BTJ's ability to sustain solid moves.
Volume: 239.402K Avg Volume: 260.117K
BUY POINT: $43.32 Volume=350K Target=$54.95 Stop=$41.38
POSITION: - Stock (no option chain)

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