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Author: Mike Celeste Editor: Tony Ponzo April Circulation: 6805

Stat Sheet Week Ending April 19th 2008

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+515.0+4.2%-425.0-3.2%
S&P+57.0+4.3%-78.0-5.3%
NAS+113.0+4.9%-249.0-9.4%

Highlight of this past week: CMI turns on its engine and powers up big. With it up 5.89 on Friday alone, it is now winning big in the Big Dipper strategy with over an $8 profit so far.

In this Issue---
SplitMaster Basic System---
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Boy, talk about mixed emotions---We have a Basic stock that has lingered for a long time and it jumped over 6 points at its high on Friday (that's 12 pre-split points). Then we have another stock in the Basic system that split 4-1 and it fell around 3.50 points on Friday. That's equal to a drop of 14 points---and the reason is that one high official quit and is taking some key people with him, apparently. The company said earnings would not be affected. The growth of earnings is a higher percent, also, than the PE ratio, so that is another good sign that the stock should recover.

 Big Dipper System---
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We were lucky enough to have the stock that jumped 6 points also in the Big Dipper. We expect to sell it, barring any bad news over the weekend. That's why we like the Big Dipper. Two reasons--if you bought the stock as a Basic play, you average your cost. If you buy it only as a Big Dipper, you stand a much better chance of making a nice profit, since you are sort of buying it at a discount. The other stock that dropped big today is going to be considered for addition into the Big Dipper program. More to our members later.

 Options---
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This past week we started a new approach, combining stocks and covered CALLs. We bought the stock and wrote the CALL. Now the stock has gone up and so has the call. We wrote the call for $5.00 and it is now $5.90 bid, $6.10 ask. Yes, it is higher than what we sold it for--but we are also making money on the stock and since the CALL is covered by the stock, it really doesn't matter how high the CALL goes. We want the stock and the CALL to go up by the time the May options expire. If the stock goes up past the strike price by expiration, our stock gets called out giving us a profit of $5 for on the CALL and what ever the difference is in what we bought the stock for and the strike price. So if we bought the stock at 113.50 and it we received $5 for the 115 CALL, and the stock goes up and get called out on expiration we would receive $1.50 profit for the stock (115 - 113.50= 1.50) plus $5 for the option, giving us an overall profit of $6.50. Yes, that is the most we can receive but it is a decent profit especially in today's market. If the stock does not go above 115 by expiration date, we still keep the $5 and can hold on to the stock until it becomes profitable. OR --- you could sell the next months CALL on it and earn more premium. This is a good strategy and tends to be less stressful than many other more aggressive option strategies.

Other written PUTs are working out, and some expired this week, for April expiration. When a PUT is written, we try to write it at a price that we think would be a bargain to buy the stock at. In other words, if the stock is 57 and we write the 50 put, we would like to buy the stock at 50 if it is "put" to us because the stock price drops. We would be buying the stock at a discount to today's price, and if the stock does not drop to 50, then we get to keep the money received for selling/writing the put. This is a good thought to apply to Big Dipper prices--writing the put at the price we would like to see the stock drop to. If it doesn't, a nice "dividend" is made.

 Momentum Plays---
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The earnings announcements are starting to roll in for the new quarter giving us more plays. But we had a mixed bag of results for the week with some winners and some losers. Momentum Past Results We have more winners than losers for the month and the losers have been kept to relatively small losses with the addition of our new conditional order strategy. So we are ahead profit wise but, we had a few disappointments this week and we were looking for better results overall.

First, the new conditional order strategy, needs some adjusting as it stopped us out of an IBM play that later, turned around and would have given us a decent profit. Of course, the stock itself traded a little unexpectedly which made it a bit more difficult to judge, but had we put our stop loss side a little lower, we would not have been stopped out and would have a profit to report. So we are still adjusting that strategy. The fine line is to put a stop that gives us some breathing room but at the same time limits the losses so as not to eat too much into our profits.

Second, we are still tuning up the new SPY option play. I think we are doing pretty well on this one but the mood of the market seems to be changing and that may have given us a harder time on some of the plays this week. What I mean by that is, over that last several months, we have been focusing more on going into PUT plays. The reason is, almost always, when the market runs up, the bears easily drag the market back down. So we just wait for the market to go up to a resistance point, buy a PUT and wait. However, this week, we got a surprise. The Bears where not able to drag the markets down. If we timed a play exactly right, (which is not often possible) we could still win on a PUT but it was much harder this week. The CALL plays would have obviously been easier. However, it is hard to tell when the market first changes its mood. We usually have a transition week and this may have been it.

The good news is, the mood of the market may be changing to the upside. But there is still uncertainty as the economic outlook is still not very good. The right kind of bad news could change things back again. So we are going to have to watch this carefully and judge. At this point, we are thinking next week will still be an up mood, but we'll see.

The Economy, The Markets & Commentary---
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Friday made sure the week ended on a definite high note. Google sparked the markets to a great up move, and it held most of the gain thru the day. In addition, the moving averages and futures seem to indicate higher moves. The 20 day moving average and the 50 are looking like they want to cross--to the upside. It is hard for us to understand how the market can continue to go up in this declining economy, but you don't fight the trend. They say the market is six months in front of the economy and let's hope that is the case now. The energy stocks are still going crazy, and related others are following. Oil continues its unrelenting rise, oblivious it seems, to anything. Everyone I know in business says they have been hurt by gas prices---but the market is moving up. There is not much more to point to this week, so we say we will be glued to the markets next week. In the meantime--Enjoy your weekend.

 Today's Thought---
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Goals are dreams with deadlines.....Diana Scharf Hunt


Mike

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