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2) Stock Splits

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 to watch and our current analysis.

Chart by StockCharts.com

UNH (Unitedhealth Group--$93.49; +1.28; optionable): Health care plans. Splits 2:1 on 6-19-03.
Company Profile
STATUS: Cup with handle. This is a pre-split that just happens to be in a good pattern as well. UNH is in the handle of a 7-month base showing solid 7 to 3 accumulation. It has been working on the handle, the lateral and slightly lower trading range that shakes out the final sellers, the past 3 weeks. Volume has been trailing off, down all last week on lower and lower below average trade. That is very good handle action as it shows fewer and fewer sellers even as the stock moves lower. Pretty soon the sellers are gone and good old supply and demand takes over and the stock breaks out. Looking for a stronger volume break higher to initiate some positions.
Volume: 871.6K Avg Volume: 2.31M
BUY POINT: $93.74 Volume=2M Target=$100 Stop=$91.22
POSITION: UHB FR - June $90c (72 delta) or UHB IS - Sept. $95c (49 delta)

Click here for more information on our Stock Split Report!

The IPO market is a feast and most suckers are starving. If you don’t believe it, look at the numbers.

The 2003 IPO Scorecard, as of April 30, 2003, showed bankers had priced only five IPOs for the year to date. Admittedly, that’s not much to brag about, especially when one flips back through the years. Last year, the IPO pipeline turned out 24 IPOs through the first four months, according to available records.

(This IPO story is continued on our website in the IPO Forum.)