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Author: Mike Celeste Editor: Tony Ponzo February Circulation:

Stat Sheet Week Ending February 17th 2007

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+187.0+1.5%+303.0+2.4%
S&P+18.0+1.3%+38.0+2.7%
NAS+36.0+1.5%+81.0+3.4%
Splitmaster Strategies
Basic...............+3.3%
Big Dipper..............0.0%
Option Calls..............+32.0%
Option Puts..............0.0%

Highlight of this past week:--Momentum plays--showing incredible potential.

In this Issue---

SplitMaster Basic System---
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OK, all of you out there. Get ready for this coming week, as we have 3 new plays coming on Wednesday. All have options, too. If you have been waiting for the real action to start, you are going to get your wish. Team members can see the plays on the web site now. At this time we have 5 currently active plays going, with 2 to close during the week, so we will have lots to work with--keep your wits about you.

 Big Dipper System---
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The sleeping giant hasn't come awake with any new Big Dipper plays yet, but we did come close. ZOLL missed hitting the BD buy price by just 2 cents and has rallied up from there. I hope some of the team were able to get in on it--jumping the gun just a bit. It does give us some satisfaction that our calculating came that close to the bottom. (We won't mention another stock that is puzzling the bejeezers out of us--and we are waiting for more news from that company, by the way.)

 Options---
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Try not to go crazy with all the choices we are coming out with on options. With all the new option plays on the Basic System that are coming out, we have even more when looking at the Momentum plays. My suggestion is that you build up a system of your own to keep track of the options during the hectic time when considering which option to play. We do list the suggested options on the Basic, but the Momentum plays are different as they move fast and you had best be ready when the opportunity comes. I'm learning from Tony and the team, and they have a pretty darn good system that seems to take a lot of the confusion out. They have explained it to the Beta Testers that have opted to take their daily emails, both before, during and after the market closes.

We think it is worthwhile to mention another tip for option players--and ourselves, too. It is a good idea to check the Option Calculator for option value on a particular option. It is just a guideline, but you can often see when the options get out of line, and maybe plan accordingly.

Another tip is to check the next month's price at the same strike price. For instance, I was interested in an RSI play on FDP and checked the Feb. and March options. Lo and behold, the March 17.50 PUT was just 5 cents more, on the ask side. That eliminated any question about which I was going to get--the March. (See below for mention in the RSI section.) The point is--this is not the first time that 2 months expiration dates have seen close prices. I don't know if it means that the stock is going to go the opposite way, but I wanted to get it and was happy to see that "good" price. Time will tell.

Our last comment about options deals with expiration day. The closer we come to the month's expiration day, the better we like it, for the Momentum Plays. Being close to expiration means that there is little, very little, premium in the options. Since the plays are set to be for only part of one day, that means that if the stock goes in the direction expected, the trader is going to benefit almost cent for cent, or dollar for dollar. When that happens, you are investing for a fraction of what the stock price is, while benefiting from a limited risk while having a great upside potential on the option. The one day in question on that, is expiration date itself. On that date, depending on the price of the stock in relation to the option strike, it maybe be better to go into the next month's option. If it is fairly deep in-the-money it should be good. If it is close to at-the-money, it is most likely better to go out to the next month.

 Momentum Play- This Week---
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The Momentum plays continues to do well. We did have some losers this week but overall, once again this is stacking up to be a strategy that we will most likely make an official strategy on our site in the not too distant future. This week, the week of Monday 02/09/07, we had seven plays. We had five winners and two losses. The last play BWLD should not have been a loser though. Once again we made a mistake by going into the play too early in the morning. In other words, the SplitMaster team jumped the gun. We are pleased to say that a number of beta testers reported winning on this play. One member went into the March option instead and that made a difference. As mentioned above, this play was at-the-money and that is playing too risky on expiration date because one down move and the premium, is gone. But on the March option, the premium stays. See the difference? We could have played the deeper in-the-money option and probably been OK but that was expensive because it was $5 in the money. So we made two mistakes where several testers made better choices and won. I wish we could post their plays instead but will stick with what the SplitMaster team did. The only time we will post members plays is when we miss a play for some reason that most testers traded. Then we post the average numbers of those testers that reported to us.

March is approaching which is the last month of the quarter. That means the plays will become less until April but there will still be some, so keep your eye on the Past Results section of our site under the Momentum plays.

Chart Indicator---
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The CI keeps rolling along in Positive territory. Team members can see it every day on the Big Dipper page at the top. I don't want to roil the waters and jinx it, so enough said--we're still Positive.

 Stock Split Comments---
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The pot is filling with new split announcements and we hope we can see some boiling water pretty soon. As you can see by the comments above, we are definitely getting our fill of new plays. Counting the 3 opening up as buys next Wed., we have 6 new buys for the rest of Feb., the short month of the year. This past week saw 6 new announcements that met our criteria, including 2 on this Friday--and Fridays are usually absent of split announcements. We believe the reason for not announcing on Friday is that the company wants the news to be fresh in everyone's mind, and not forgotten by Tuesday. (Remember, Monday is a holiday and there is no market.) Also, many financial people leave town early on Friday, and the release won't be seen by them until late Monday--if then. We are eager to see the ball rolling downhill, instead of an uphill push to get some plays. Of course, we don't want to get overrun with splits, where we use all our capital, as happened last year in the springtime, when we saw that sudden and sever reversal in all the markets, and for no good reason, either. Right now we are seeing just about the right amount of splitters.

New RSI System---
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I'm still in the studying mode for this system, but did get off a profitable play. That was on a current splitter, CMCSA, and I made a 25% profit on the quick trade. I'm also short on RDEN and it is extremely strong, so there is a smaller loss--no options played on this one. FDP is another actual play just entered, buying the March 17.50 PUTs. This system is a 1-3 day play, based on the RSI number. When the RSI is high, it could be a short and when the RSI is very low, it could be a buy long--or a PUT or CALL if using the options. We want to be critical in setting up our buy and sell range, so it is going to take some time, but we think we are getting there. CHE became a qualifier on Friday, and we are looking for a downward move. I'm not getting CHE, but look at it. The price at close on Friday was 39.75. It may also be at a resistance point. It's tempting me, I'll say that. Let me be clear, tho, that we might tighten up even more, and look for about 4 days in a row of a high/low number. FDP is actually scary to me, as it has gone up in price for 12 straight days, and the RSI high number has been the highest it can be (99) for 8 straight days--not a good sign, really. Hey, we sure would like to see one of the Basic splitter plays go up for 12 straight days, wouldn't we? I'm not getting CHE, but look at it. The price at close on Friday was 39.75. It may also be at a resistance point. It's tempting me, I'll say that.

 The Economy & Commentary---
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The economy is still doing pretty well at this point. The one spot that concerns us is the employment figure. Yes, layoffs do help the bottom line as there is less expense when you have less employees, but those people need to replace their jobs. If the economy is doing well, they can be absorbed. The company usually makes more by cutting expenses and layoffs often see price rises in the stock. Hershey, the All-American candy company announced layoffs, and will outsource some of their work. The stock price did go up on the news. We all know the trend of outsourcing--and their is a debate over what is happening across the land. Our unemployment is low, but we have to look at what type of jobs are replacing those that are outsourced. If high paying jobs are replaced with lower paying service jobs, then at some point the consumer is going to be spending less. On the other hand, if our technology creates more good paying jobs, then workers will continue to be able to spend at current levels.

No need to go into the housing area and its affect on the economy and stocks. We saw reports of lower housing starts, lower housing prices, lower housing sales and an inventory that still needs to be worked off. Oh, and we continued to read about how the housing market has hit bottom. The "boy that cried wolf" is still out there" and he will be right at some time.

Gasoline continues to rise in our neck of the woods, with the "experts" telling us we might see prices over $3/gallon this year. The Petroleum Report showed that spot crude oil prices were $2.15/barrel below last year at this time, while gas was 19.3 cents higher than last year--again, more of the same baloney. We get it shoved down our throat. So far, the economy, surprisingly, has been able to handle it. (That doesn't make it easier to swallow, tho.)

The Nas has continued to follow form and while this past week was an enjoyable one to watch, we still haven't reached the highs hit on the 9th trading day of 2007. This confirms (and strengthens) our previously stated "Ol' Dad" adage to sell by the 10th day of Jan. and buy back later. We would like to see those highs broken later on in Feb., but we are making no prediction, one way or the other.

Commentary--
I want to take a moment to make my own testimonial. This is for my partners and in regard to their work on the Momentum Plays. I know that most people don't care what goes into making the picks, but I want to say that it is a lot of hard work on their part. And that hard work is paying off. They spend many hours each day going thru the upcoming earnings list. They have to research the plays to see if they qualify to be on the list, and usually come up with several possibilities. At least 3 emails are usually sent to everyone, while the SplitMaster team stays abreast of each play, using streamers, etc., and then making actual plays so they can report (and hopefully, make a profit for SplitMaster) real transactions. The hard work is paying off as they refine the system and get in a groove to try to make it all go smoothly. Since the first of the year there have been just 4 losses in 24 plays. For February alone there were 3 losses in 18 plays. That's quite a record--and in looking back, a couple of the losses would have been averted with the new criteria they are using. If you are interested in day trading, the SplitMaster team has cooked up a system that is cranking. It is still in testing as Tony mentioned above but probably not for long.

Taking a quick look at some of the trades this past week, we would like to point out IRBT, ASF, TAP and BWLD options, in the Momentum plays. There are several methods of making these plays. We are working on a conservative approach at this time, trying to get more wins at a decent profit---while we work out improvements in criteria. More adventuresome traders can try for higher profits and some can try for a real "home run". The stocks listed above could have hit home runs for those that tried this past week. IRBT options went from $.55 to $1.20. ASF went from $2.00 to a high of $5.60. TAP really went out of the "ballpark", going from $.50 to a high of $2.80. BWLD, on Friday, is mentioned below. Looking to hit the home run in options depends on the player's comfort level. Those that can handle it might come out ahead by hitting fewer wins, but at a much higher percentage return. Others can be satisfied with more profitable plays, but at a lower return level. At any rate, the Momentum System is really showing excellent results---for the traders among you.

Another thought about RSI. If we could ever get enough time to combine the RSI with the Momentum play, we could possibly have a monster on our hands. However, right now, all of us are working lots of hours on our pet projects---but it is a thought. Just an example---On 2/14 the RSI on BWLD was a low number (0, the lowest possible) and the stock was about 46.00 (a low of 45.76) Earnings were set to be released after the close on 2/15, affecting the open on Friday, 2/16. What happened with that combination of RSI and Earnings? On Friday, the stock hit a high of 55.74. So, we see the stock jumped over 9 points, but what happened with the options. The Feb. 45 CALL was probably no more than 2.00 on Wed., since it was so close to expiration--and that's giving it a 1 point premium. The CALL made a high of 10.50 on Friday. There you go.

 Today's Thought---
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Discipline is the bridge between goals and accomplishments.....Jim Rohn


Mike

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