us stock market, trend trading stock

- MSFT ignites enthusiasm, jobs report tamps it out, but new money to start the month wins out.
- January jobs slide negative as January weekly claims apparently way off.
- ISM comes right back above 50 after a one-month hiatus.
- Impressive rebound pushed by Fed rate cuts and new money at turn of the month, but the next test is still coming.

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

Chart by StockCharts.com

Company Profile
After that nasty selloff to start January stocks, as they always do, rebounded. As the market moved up in its first week of the rebound we were looking for downside plays on weak stocks that made a rebound but had some downside catalyst to send them right back down. SII filled the bill. Nasty selloff, then a rebound on declining volume, rallying back to the 200 day SMA and stalling. Indeed, it showed a big doji on the candlestick chart right below the 200 day SMA on 1-25-08. A little research showed earnings were out on 1-29. The sector was weakening and SII was in a weak technical position. We put in on the report over the weekend.

On Monday 1-28-08 SII gapped lower and sold. We waited for it to rebound if it would, and it did. When that started to roll back over we moved in with some put options, some March $62.50 strike puts that were asking $5.90. Well, SII faded a bit more but then reversed back up that session to close flat. Not exactly what we wanted, but volume was lower and it was still below the 200 day SMA, showing another doji, so it still had the weak technical look, and there was also those earnings to come. The pattern indicated earnings would be weak and that is why we wanted the play.

Sure enough earnings came out and they were as the pattern indicated: lower than expected. SII gapped lower on the news and sold off further. When it came close to the prior January lows hit just a week before that is when we went on alert to see if it was going to sell off further or bounce. It hit $54.09 on the low, paused, then started to rebound. That was all we wanted on the trade; we had calculated our gain based on a move down almost to that level. It would give us a good return and we would not have to work about having to plow new ground. Of course you also don't want to get caught in a double bottom situation. So, when it held and started to bounce we sold the position when the stock was at $54.80 and the options were bidding $9. That was a cool 52% gain overnight. No issues with that.

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: 2-7-08
STATUS: Cup. FLIR is trying to make the bounce off the lows in its 14 week pattern, coming off the 50 day EMA (31.11) Friday, showing a good finish to the week. Surged to a new all-time high in October and early November, but after a long run it needed a breather. Another stock that has formed a nice base when much of the market was ripped up. Solid price jump Friday after a good Thursday volume session. Want to see more trade as it continues higher to show that was not a fluke day for the volume.
Volume: 1.396M Avg Volume: 1.322M
BUY POINT: $33.21 Volume=1.6M Target=$39.85 Stop=$30.89
POSITION: FFQ DZ - Apr. $32.50c (56 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.