us stock market, trend trading stock

- Stocks surge to a DJ30 breakout as investors like even Citigroup's loss.
- Bond yields jump, dollar firms, gold plunges: what the markets outside stocks are telling you.
- Price surges to come: how the government tied food prices to energy prices and how we are all going to pay the price.
- NASDAQ, SP500 breakout will confirm a continued rally near term.

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

Chart by StockCharts.com

Company Profile
Some drillers had already moved higher, and though DO was lagging some it had set up a simply great pattern. It also has a propensity to surge when it moves, always a very nice feature in a stock. It had worked laterally on below average volume for 7 weeks, the kind of quiet action that gets most investors to ignore a stock. That is typical, however, and it was showing slow, steady accumulation during this period.

We put it on the report on 4-9-08 when it showed a bump up toward the top of its range after coming off a test of key support at the 200 day SMA. Volume had started to bump higher on the upside sessions so we wanted to be ready as it made its break higher. Three sessions later it did just that, surging on a big shot of volume. We bought some stock positions at $129.88 and some June $125 strike call options at $8.10. With all of the inflated option premiums, a stock almost $5 in the money with just a $3 premium was a deal. That is what all of that quiet below average volume gets you, i.e. lower priced options because the volatility component is so low.

It closed at $131.52 that session. As is often the case the stock took a breather after logging that $6.75 gain. The following session, however, it was up $4.57. Another day off on Thursday, and then boom, another $5.54 Friday, closing off its high at $138.75. Now if you know us, when we get a rip higher in a stock over a short period we look to take some gain, particularly on options. DO was up $13.50 in 5 sessions. We banked some of the stock gain at $139.51, near the high of the session, taking in 7.4%; not huge but not bad for 5 days in the play. We also banked some option gain, selling some calls for $13.50, pocketing 66.6% or $540/contract. Again, not bad for 5 days in the play.

DO may test back to start the week. If it does come back a few points and holds, we will look at some more positions because it has set up a nice base and we anticipate a handle to form that will give us another breakout and a real ride for our money.

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: 5-1-08
STATUS: Ascending triangle. DNR is pinching off at the top part of its 4 month base, making a higher low at the 50 day EMA the past two weeks and bouncing higher this week with the market. It bumped the early January, February and March highs, and closed the week there. Looking for a high volume breakout over that resistance to move into positions as DNR breaks out to a new all-time high and a new run.
Volume: 1.482M Avg Volume: 2.271M
BUY POINT: $32.65 Volume=3.4M Target=$38.95 Stop=$30.55
POSITION: DNR IF - Aug. $30c (66 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.