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- Indexes take a breather as semiconductors try to hang on at the 50 day MVA.
- Big week ahead for the consumer while business spending surges.
- Holiday rally was in force as old economy surged, techs refused to cave.
- 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

LEN (Lennar--$95.65; -0.2; optionable): Residential construction. Splits 2:1 on 1-21-03.
Company Profile
STATUS: 50 day MVA test. After another breakout from its most recent base in October, LEN rallied to 100. That point is both a magnet and a barrier; stocks rush to get there and then they stall when they make it. LEN hit 100 to start the month and then fell back with the rest of the homebuilders. As with the builders, it held the 50 day MVA (90.92) and moved laterally for a week before starting the bounce up last week. Volume was strong to start the move, but then faded to end the week. Not bad action, however, as LEN cleared the 18 day MVA (94.42) Thursday and then took a breather Friday, holding over the 18 day. Looking for it to tap the 18 day again and then continue the move on some better volume.
Volume: 1.186M Avg Volume: 1.554M
BUY POINT: $96.62 Volume=1.7M Target=$106 Stop=$94.21
POSITION: LEN BS - Feb. $95c (56 delta).

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