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- Microsoft earnings knock stocks to the 50 day MVA.
- Money supply contracting & causing interest rates to rise, deficit criticism overblown.
- Nice volume bounce off 50 day by indexes as leading stocks do the same. Ready already?
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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

ADTN (Adtran--$66.54; +0.38; optionable): Telecom equipment. Splits 3:2 on 12-16-03.
Company Profile
STATUS: Test 50 day MVA. After peaking at 75 in early October, ADTN has dropped back with the rest of the market the past two weeks, coming to rest just over the 50 day MVA (64.12). The move back was on lower, below average volume. This is where you want to see a stock hold and start back up on rising volume if it is going to make another move. Thus we want to see it make a strong jump on strong volume. Our target initially is the prior high at 75.
Volume: 693.046K Avg Volume: 1.035M
BUY POINT: $66.77 Volume=1.1M Target=$75 Stop=$63.98
POSITION: RQA LM - Dec. $65c (60 delta) &/or Stock.

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