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- Market recovers from a series of surprises with a bounce off the 50 day MVA.
- Employment lags still.
- O’Neill forced out. That is good, that is bad.
- After a week of consolidation, a heavy news load, and a 50 day MVA test, indexes poised to recover.
- 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

PSUN (Pacific Sunwear--$27.71; -0.01; optionable): Announced a split 12-5-02.
Company Profile
STATUS: Attempting the second breakout. After the wild action Thursday PSUN gapped lower but managed to turn back to close flat. Volume backed off but was strong as PSUN held the 10 day MVA on the low and recovered. Ready for the move.
Volume: 1.412M Avg Volume: 995.181K
BUY POINT: $28.05 Volume=1.5M Target=$33 Stop=$25.95
POSITION: PVQ FE - June $25c (71 delta, low OI) and/or stock.

Click here for more information on our Stock Split Report!

Investors cheered the debut of Chicago Mercantile Exchange Holdings Inc. (CME.N), the first major U.S. financial exchange to go public, on Friday, sending its shares up 17 percent on the New York Stock Exchange.

The offering by CME, the world's No. 2 futures exchange, lived up to its advance billing as one of the year's hottest IPOs, as its shares in their first day of trading led all gainers on the New York Stock Exchange in percentage terms.

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