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- A batch of weak economic data puts a lid on the Friday action.
- Consumer prices show continued erosion even as consumer confidence continues improvement.
- Overall action solid but more trouble signs as small caps and chips fall hard.
- Subscriber Questions.
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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

CEDC (Central European District--$32.7; +0.01; no options): Basic Materials. Splits 3:2 on 6-2-03.
Company Profile
STATUS: Test breakout. Solid move up off the 10 day MVA (31.12) on above average volume Thursday, CEDC held steady Friday on lower, average volume. CEDC held up very well in the Friday selling, and we are looking for a continued move higher this week on the back of its solid accumulation during its 3-month base and outstanding money flow that is rising ahead of the price.
Volume: 143.911K Avg Volume: 131.237K
BUY POINT: New: $32.92 (orig. $31.78) Volume=186K Target=$36.55 Stop=$30.65
POSITION: - Stock (no option chain).

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The cardinal rule for investing comes from a veteran portfolio manager. It is this: When a company’s management tells you they have a problem --- believe them!

Last week’s aborted attempt to price an IPO underscored this axiom.

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