us stock market, trend trading stock

- Stronger dollar, lower oil help investors ignore hot inflation, weak sentiment and post a week ending gain.
- Michigan sentiment keeps heading lower as gasoline keeps heading higher.
- Inflation has to slow, oil has to fall before overall market finds firm footing.
- Get your cows now: feed corn at its lowest level in 15 years.
- Playing the winning sectors upside, shorting the rest.

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

Chart by StockCharts.com

Company Profile
Last week I talked about plays on stocks that are in sectors everyone is looking at thanks to the volatile market and the selling in many sectors. This has created a group of 'safe sectors' that investors view as a good place to put their money in these times, betting on the global demand to push them higher. Thus far it has worked, but these crowded trades can be dangerous when the sentiment turns. Before that happens, however, you can find buys over and over again as new stocks in the sectors get money pushed their way. When that happens the gains are nice and rather quick.

Coal is one of those sectors. We have played stocks such as BTU and ACI, but we were watching other stocks in the sector as well, watching for them to set up bases showing buying, ready to break higher. NCOC is one such stock. It had a late 2007 run and then fell into a 4.5 month flat base, breaking higher in May. We saw that break and then waited for the test: in a volatile market the first test of a breakout is one of our favorite places to buy upside because if the stock holds up and starts back up off of near support that shows us the big buyers still want more and we come along for the ride.

We saw NCOC making the test back to near support at the 10 day EMA and we put it on the report on 5-8-08. It held at that level the next session, but on 5-30 it blasted higher on strong volume. We moved in with stock positions at $7.34. We would have taken some option positions but there is no option string associated. NCOC surged to $8.16 the next session but it could not hold all of the move, closing at $7.66. A good start nonetheless as volume was huge, showing many buyers coming in after we got in. It tested for two sessions following the start of this next leg, then was up again, starting a steady rise up the 10 day EMA, just as you want to see for a stock resuming its breakout move. On 6-11 it added $0.46 and closed at $8.18. The next session (last Thursday) it added another $0.55 to close at $8.73 after rallying to $9.50 on the session high. That intraday moved tripped our initial target point and we sold some of the shares, banking a 25% gain on this move before NCOC slid back some. Of course Friday NCOC added a bit more, closing at $9.00. No complaints as we kept some of our position to continue working for us.

This demonstrates how even in an overall weaker market if you spot the sectors getting money you can continually find plays on 'old' stocks that have already run as well as 'new' stocks starting new runs thanks to investors looking around for places to put their money in already crowded sectors. No problem with that. All we have to do is recognize what is going on, take advantage of what the market is giving us, and know that if the selling hits here it can go down fast as the money moves out. If you are aware of where you are investing, you can reap the reward and stay safe as well.

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
STATUS: Cup w/handle. Moved higher through the split Friday, moving up off the 18 day EMA on some brisk trade. Nice action and still a buy as it continues the move higher. To recap: Split Friday and continued higher in its great pattern. Nice 9 month base with a 4-week handle forming, showing a nice spike in volume Thursday as SF tried to break higher but then faded back. Very solid base forming just below the old high, ready to make the breakout and run to a new high once more.
Volume: 242.183K Avg Volume: 198.605K
BUY POINT: New: On a continued move higher (orig. $38.48) Volume=300K Target=$44.65 Stop=$36.36
POSITION: SF GG - July $35c (57 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.