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Author: Mike Celeste Editor: Tony Ponzo October Circulation:

Stat Sheet Week Ending October 24th 2009

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow-4.00.0%+1,216.0+13.9%
S&P-7.0-0.6%+177.0+19.6%
NAS-3.00.0%+577.0+36.6%

Highlight of this past week: Are stock splits back on the move? An old stock split ALXN, makes a nice move up into profit territory and we took the profit. Results And a new splitter is on the way. Also, the Momentum Strategy moves up to a 442% profit Results

In this Issue---
SplitMaster Basic System---
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Finally--We were able to close out one of our Basic Splitters and at a profit. Not much, but a lot higher than it was earlier this year. Another one came close, but it seems we will have to wait a bit longer as it has retreated. Our winner was ALXN, and it had a nice jump this week right after a good earnings report came out. It has since gone higher by about 50 cents, but we are happy to get out with a profit.

Options---
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Last week we gave an example of an upcoming splitter, EBIX and how to take advantage thru options. A week ago Friday it went up over 3 points to around 63.20. This week it continued its run, moving to a high of 67.03. If you had written the Puts, you would have been able to buy them back for a handsome profit. If you had bought the Calls, you would have had a handsome profit. We continue to say that stock splits usually happen when a company is doing well. Here is another example--and we haven't seen the earnings yet--they will be coming out soon. That will test our theory that if a stock announces a split shortly before earnings release, we are most likely going to see a good report.

Momentum Plays---
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We had a mixed week of wins and losses but by the end of the week, the wins overpowered the losses to give us an overall profit. This strategy has now moved up to a yearly profit of 442.76%. Results And the number of plays is increasing as we had 7 plays this week - 3 losses and 4 wins.

The play that really stands out for us in this strategy though is AMZN - one of our plays on Friday. The Call was purchased for 2.90. Being a conservative strategy we took our profits at 3.25. That was a .35 profit in just two minutes. In fact it moved up so fast it was there before we could post a "get out" signal. And it did not really retract from there. It just kept going up. Many members reported taking a profit at 3.50 and higher. But a couple of real aggressive players took profits well over $5. And in the end we saw a high on that option of 7.50 --- the SAME day! That is way over double the purchase price---and if you had 10 Calls, you would have made a net of $4,600 on an investment of $2,900. Those are the type of home runs that pop up occasionally. One like that can make up for the small stop losses that we have from time to time.

This is when it pays to be a little more aggressive. But we try to deliver a consistent win rate and in doing so, we find that overall we have to have conservative targets and stick to them. Still, one wonders how we might take advantage of such situations.

Henry, one of our long term members and a very experienced trader sent in an idea on this subject and we would like to share it with you. It's the kind of trading idea that we probably would not have time to post in the middle of our fast trading but it is one that each member could consider employing on their own. The strategy is as follows: Say you buy 10 contracts at 2.90 a share on one of the Momentum strategy plays. Then we post a profit target of .35 or out at 3.25 and a stop at 2.60. This strategy would require that you watch the play and not put in our orders in advance but rather a couple of trade tickest in advance and have them ready to submit. If the stock drops and hits the stop price you quickly submit the order and get out of all 10 contracts. However, if the stock moves up to the profit target, especially if it moves fast, have an order ready to sell only 5 contracts. Then set up a ticket to sell the other 5 contracts at .30 higher or at 3.55. In case the stock turns on you, change the stop ticket to 2.90 or out at break even. That way the worst thing that can happen is you made a profit on 5 contracts and broke even on the other 5. The good thing that could happen is you would make a .35 profit on 5 contracts and a .65 profit on the other 5 thus taking advantage of a good run. Now, you can change these numbers anyway you would like - make your stop more liberal and go for .40 or .50 more on the second half. Or, you could break down the second half so that you sell 3 contracts at a .65 profit and let 2 more contracts go for a higher profit and make that stop at the .30 profit market. There is all kinds of ideas you can employ but we like this strategy and we hope you can use it to your advantage. Thanks Henry.

Note: If you are not trading this strategy but find it interesting, check it out at Learn more You can try this strategy with our no risk program for 30 days.

Indicators---
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We had only 1 play this past week, but it was a winner, so we never feel bad about making a play that turns into a winner. That made 5 wins out of 6 plays thus far in October and a yearly total of 53 wins out of 66 plays for the year, a very nice 80% win rate. Check out this lower cost no risk program for 30 days at Learn more

Feedback---
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We noticed that there seem to be more technicians joining the rest of our team members, as our feedback centers around technical factors. What these members are doing is combining our strategies with technical points that they have developed over the years. The combination of these factors has increased their profits, as we are told. Congrats, people, keep up the good work.

One specific example is an email from member Teri who states, when I saw that AZMN had very little down momentum at the open and saw a couple of upgrades given earlier, I thought I would stick it out a little longer and go for more profit. When the stock went above 113 and held I knew I was in for a good ride. I still feel like I chickened out as I sold at 3.80. But it just kept going up all day. Still, I am very excited with a .90 profit!!. Thanks you guys for a great play, Teri

The Economy, The Markets & Commentary---
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There have been a couple of huge battles flaring up this week, between Washington and Wall Street, and also the Media. The White House has been targeting Fox News and actually barred them from interviewing an administration member---until the rest of the media joined together and said that if Fox was excluded, the others would not participate. There was a quick revision on the part of the White House. The interview was about the administration's statement that top level pay was going to be reduced in the 7 largest companies that took TARP money. Boy, did that hit a nerve on Wall St., and the media jumped all over it. It seemed to me that CNBC spent tons of time on the subject and from the way the questions were phrased, it was apparent that they were against the proposal. There were 2 sides given, and I thought the defenders of the pay cut covered it quite well. The American taxpayers are the majority owners in a lot of the companies that would have gone bankrupt if the huge funds were not given to them, as loans, etc. The government seems to feel that they should have a say in these extraordinary bonuses and extreme pay scales at the top levels of these companies. Do you believe that the majority owner or lender that made it possible to avoid bankruptcy should have a say in the pay within the companies? We might also point out that these huge bonuses and pay levels were paid even tho the executives' decisions were very detrimental to the company's net worth--in many cases causing the company to be on a death watch. The other side is - do we really want the government to start dictating pay/compensation rates? We aren't making a judgment here, just showing the sides. Whenever I went to the bank for a loan or for a mortgage, etc., I was told what the terms were, whether for my business or for my personal use. A variation to the Golden Rule---He who has the gold, rules. Should this be any different when taxpayer money is used? The question would be , should pay parameters be set by the government or by shareholders of the company? And if by shareholders, how would it be done? You make the decision that you are comfortable with.

The Dow hit 10,000 a week ago, and this week, the bulls and bears battled to see if it would hold. The results? Monday, up 96 points, Tues. down 51, Wed. down another 92 points. Uh, oh--did we break the bubble? Heck, no. That momentum hasn't been broken yet, as Thursday saw the Dow up 132 points and the volatility continued on Friday, with a drop of 109 points. The net result (seen in the stats above, too) was a loss in the Dow of 24 points---hardly enough to say a bubble was broken. No, we have to see stronger results, as there is a lot of support at certain levels. A break may be coming, but we don't think you can say that the evidence was shown this past week. There were some outstanding earnings reports that blew away estimates (not necessarily in comparisons to last year, but current estimates. Although there were some that were above last year's numbers). As a good building is built brick by brick, a recovery needs a company to build one step at a time to put together pieces to make the total a net positive construction.

Stay tuned...........we are in interesting times..................

Today's Thought---
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Inner Peace................if you can start the day without caffeine.

Mike

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