us stock market, trend trading stock

- GE shocks the market as its financial services division runs aground.
- Import prices surge as the US is in fact importing inflation.
- Sentiment falls to 1982 levels in the great north.
- Talk of a bigger bailout in the works.
- Volatility not budging with the Fed and the feds acting as the backstop.
- Low volume Friday holds out possibility market can heal itself, but more than ever it needs good guidance, a lot of good guidance, to pull things back together.

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

Chart by StockCharts.com

Company Profile
We went back to the well for some more AAPL as it tested the nice move off of the February and March lows, a move that already made us some nice money. When it came back to test on 3-27 we put it on the report, ready to move in when the test was over. The next session AAPL gapped higher and we went ahead and moved in with some more stock positions at $143.93 and some July $140 strike call options at $17.15. With the kind of momentum AAPL had off its nice rounded bottom we were ready to move in when it showed any signs it was heading back up.

AAPL surged the next session up to $145.71, but it could not hold much of that move. The momentum kicked in the next session, however, with a $6 gain. A day off the next session and then a break through the 200 day SMA as it added just over $4. Another $1.50 the next session and then a gap higher to $156 and a run up to $159.69 on the session high. Strong move over just a short period of time, and we decided to book some gain after the gap and run started to erode. We sold some stock positions for $157.40, banking a 9.3% gain. We also sold some options for $25.25, a 47% gain or $810 per contract. The next session AAPL started to test its move, and when this pullback is over we will look to play it again.

Not bad given we were just playing the upside momentum moves AAPL makes as it comes off a bottom. Many investment advisors have you believe there is only one time to buy a stock and make money. That is absurd. A good stock will make a series of upside runs when it sets up, and we can play them with stock, riding up all of the moves, and with options, picking up big fat chunks of gain on each run. You pick leading stocks in good position and be ready and willing to move in when they say 'buy me.' AAPL had set up well off the bottom but not many were ready. It was, however, and we made good money once again on this move off the rounded bottom.

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: Late May
STATUS: Reverse head and shoulders. RIO faded back on nice low volume last week, holding over near support at the 18 day EMA (35.29) to finish things off. Putting the finishing touches on a nicely formed 5.5 month base needed to consolidate a strong August to October run in 2007. It has done that and is knocking on the door of a breakout and new run once more. Neat patter as the past 7 weeks (the right shoulder) is a small double bottom with handle base. Very nice pattern, very strong stock fundamentally. Looking for some solid volume as it makes the break higher and gives us the buy point.
Volume: 17.105M Avg Volume: 26.653M
BUY POINT: $37.38 Volume=40M Target=$44.95 Stop=$34.98
POSITION: RIO IU - Sept. $37.50c (53 delta) &/or Stock

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