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- Market rebounds to close the week, but trade is light.
- Core producer prices slide yet again showing no reflation at this point.
- Market poised again after another short pullback, but is it really ready?
- 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).

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 to watch and our current analysis.

Chart by StockCharts.com

KSWS (K-Swiss--$38; +0.93; optionable): Sports shoes.
Company Profile
STATUS: Testing the breakout. KSWS has already surged for us, but now it is in another good buy position. It has formed another 5 week flying plateau just as it did in April and May, and as it did then, it is making the breakout. Last Tuesday it shot higher on volume only to fall back to test the 10 day MVA on the Friday low (36.79) and then rebound for a gain. It is showing very strong, resilient action on this breakout test. Indeed, we prefer breakout tests that are successful as they ‘prove up’ the breakout, showing buyers are ready to move right back in on a dip. Looking for KSWS to pick up some volume on the continued bounce off the 10 day MVA.
Volume: 143.606K Avg Volume: 204.454K
BUY POINT: $38.55 Volume=307K Target=$44.65 Stop=$35.85
POSITION: SWU JG - Oct. $35c (74 delta) &/or Stock.

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