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Author: Mike Celeste Editor: Tony Ponzo March Circulation:

Stat Sheet Week Ending March 10th 2007

ChangesWeeklyYear to Date
Indexes Points Percent PointsPercent
Dow+162.0+1.3%-187.0-1.5%
S&P+16.0+1.2%-15.0-1.1%
NAS+20.0+0.8%-27.0-1.1%
Splitmaster Strategies
Basic...............0.0%
Big Dipper..............0.0%
Option Calls..............0.0%
Option Puts..............0.0%
Highlight of this past week: Momentum Past Plays -- showed another very good week's results, but you had to be nimble.
In this Issue--- SplitMaster Basic System---
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The Basic splitters are somewhat improved over last week, but nothing to rave about, and we are disappointed that they didn't participate more in the rally this week. We always felt that splitters are from companies that are doing well, and we shall see if the finances can again come to the forefront instead of the emotional fear we have seen lately.

 Big Dipper System---
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Of the 2 new Dippers, we have one that moved into profit and one that remains slightly below the buy price. They are both solid in value and we look forward to them breaking out to the upside.

Options---
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Since we do have a good number of option players, we thought we'd point out something that you may or may not be aware of. We're referring to option quotes right after the open in the mornings. Many, many times we see options overpriced according to the calculated value--and it appears that the market makers are taking advantage of the buildup of orders that hit the market at the open. At the beginning of this week, there were 2 weeks to go until March options expiration on Friday, Mar. 16. It is always surprising to me to see how low option premiums can be, with 2 weeks to go. Yes, we say they are overpriced and yet we comment about the low premiums (or none). These are not apples to apples, but apples and oranges. At the beginning of the day, there is one set of circumstances. Shortly after the open, the option prices slide back to normal levels. However, the surprising thing is that the bid side is often below the true value of the option. For instance, when a stock is 37.00, the March 35 call could well be 1.95 bid/2.10 ask. The call has a true value of 2, so the 1.95 is at a discount--with 2 weeks to go. That means that if you are interested in trading that option for less than 2 weeks, you are controlling a 37.00 stock for about 2.00. That, to us, is pretty good leverage, especially when using our Momentum plays that are usually over in a matter of hours, and sometimes minutes. For us, the closer we get to true value on the options, the better we like it. That way you are getting about a full ride, cent for cent or dollar for dollar on the price movement of the stock. If the stock drops and you have a call around 1, then at some point the time value kicks in and the option doesn't drop as much. Another benefit. This 2 week period is a great time to be trading options because of this feature. Most of us do not try to buy at bid or ask but someplace in the middle. But the fact that the bid is sometimes trading below true value makes the in-between prices better as well. Now a word from Tony on the Momentum plays.

 Momentum Plays - This week---
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We are in the last few weeks of the quarter and the number of companies announcing earnings is definitly slowing down. This means the number of announcing companies that meet our critieria for the play is even less. But, as we have seen in past quarters, there are still some plays that come up during this time and some were big winners. So testing members need to keep reviewing our daily emails.

This week we had three plays that we made. There was one more play (CHS) that we just missed because we were slightly late with our limit orders and it did not execute. The play would have been a nice winner. And we are happy to say that some of the testing members did get into this play and made a profit.

Unfortunately, the last play yesterday (Friday) did not cooperate. This stock (UIC) looked good and gave us a profit last quarter. It made all the classic moves in the morning and when we got in, we were excited because it started to move and we thought we had a good one. Then it tanked. Why?? We have no idea. It gapped up nearly $4 and had a great announcement. So it should have made its follow through move. But as one of our testers said in an email, sooner or later we had to get hit and he, of course, was correct. But if we can continue with a 75% to 85% win rate, we'll take those occassional big hits.

BUT --------- There could be a silver lining to this UIC play. Almost all the members including the SplitMaster team, decided to hold onto this play until Monday. History shows that when this stock goes up it continues its up trend for two or three day longer. Even though the stock came down from our entry point substantially, it was still in positive territory at the end of the day and that could be a good thing. We are going to be cautiously optimistic about its Monday move however, as often these "hold overs" do not work. But if our signals are correct and we have a bit of luck, we could turn this loser into a winner and that would be a great comeback.

There is also one more bright spot on this play. A number of testing members had the good timing to wait a bit longer to go into UIC and wound up getting in at a much lower price. There were a couple of little spike-ups in the stock during the day and they were enough to give these members a .25 to .35 profit. Congratulations to those testers.

 Chart Indicator---
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The CI continues to save us $'s as we pulled back from investing in new splitters. All of them are lower than the entry price at the regular buy time. As long as the CI is in negative territory, we are going to be very conservative. As we said--Not losing is good, too. You will notice that we did not have any PUT plays, even on the options that we did enter--the PUTs can cost quite a bit if the stocks drop severely, which they did. That was also another saving move.

Testimonials---
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Hi Tony,
I am new to the Momentum Strategy and made my first trade Friday on FLR. I waited till after the market opened to see how the options would go. Since the calls were positive, and the puts negative, I bought 1 Mar. 85 call for
$3.20. 10 minutes later I decided to sell since I had to leave the computer for the rest of the day and sold at $4.50. A nice 37% gain. I look forward to next week and its challenges.
Thanks for inviting me into the Mom. Strategy test group.----Lyle

Hi Tony,
I have mostly been watching, but I did trade today. Here is how I did:
PSS: March 30 calls, in @ 3.9, out @4.5
CHS: March 22.5 calls, in @ .5, out @ .5 (This "should" have been a
winner - I didn't get a good entry price, and I got too greedy on the exit price).
Best, Brian

Bernie reported he bettered one of our plays--On PSS, he was patient and got in at 3.50 and out at 4.10. Great move, Bernie

 The Economy & Commentary---
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The fear of the moment when the market took a dive at the early part of this month has been halted, and it is good to see--even if it is temporary. Last year, in that May-July crash, we had some strong up moves lasting just 1 day and then more sliding. At least this week showed not only a leveling off, but gains for the indexes, even tho they are still down for the year. Mixed news from the economic reports continue to come in, and there weren't any major unfavorable surprises. We saw reports that China was going to dump US bonds and not buy any more, etc., etc.--all of which proved to be just trash rumors. The international movements of currency, trade, etc., are very complicated and any simple explanation is most likely to be false. Especially the extremely negative rumors. The bad thing, tho, is that some people believe it and the snowball starts rolling downhill, picking up speed as it goes. Sooner or later, the facts come out, and normalcy does return. Economies do falter and recessions do occur, but they don't hit us all at once and cause immediate valid crashes. Emotion does all of that---and we know how emotional we get--it hits us, too, every once in a while.

The emotion we feel the most is the emotion that occurs when making the Momentum Plays. This takes a lot of faith in the belief that certain things are going to occur in the next hour or two. We're getting a better handle on the plays, too--and even tho there is a loss here and there, the results so far are excellent. Patience is a key word when getting involved in Momentum stocks--which means that there is a buildup of order before the open, as a result of the earnings being released either the night before, or before the open that morning. Our research team has been doing a fine job in eliminating those stocks whose earnings move historically have not been what we are looking for. You can't rush blindly into the opening prices on these, as we say. The patience is difficult, but it does work. I have been combining the momentum opening to the RSI and that almost forces me to remain ready until that RSI looks attractive. That helped me big time this week, and we are probably going to incorporate it more and more into the program. However, we can not be too complacent as these stocks have a habit of luring us into thinking that things have quieted down, or that the stock is going to continue to move in our direction, making our buy price more attractive. That RSI has been helpful, no question, and the goal would be to watch the RSI drop as the stock price changes--and when it is near a low level--and then starts to make a move up--that is when we like to make the move. Now this is just a guideline, but those that are familiar with the RSI can see what we mean. If you have a chart that can show the RSI, put it on there against one of the Momentum plays --and don't use a daily chart, use a combination of "x" minutes, as that will better show you these movements.

Momentum 2 comments---
We continue to track and refine our outlook on these plays--which are Momentum plays AFTER the earnings release has quieted--from 1-7 days. At this point, using only those stocks that the research team has screened, we see 16 wins and 2 losses, with just 2 of the wins being longer than 4 days. We are hoping that we can start posting some of this on the site in the near future. These are not intended to be big winners, looking for somewhere around 1.25 profit in that 4 day period, and maybe 60 cents profit on the options. The regular momentum play often sees more than that in a matter of hours, not days. We are also tracking other combinations of data, and will report more on these in the future. For those that are interested, we can have you track 2 new entries and they are PSS and MW--looking for a minimum of a 1 point move up in the next 7 trading days. PSS from 34.50 and MW from 47.59. Let's see if we can get them to move up within this coming time frame.

Comments on our RSI study--
We are continuing to learn more about this tool, and it has us excited. There are so many factors that can be taken into consideration, and we want to test, eliminate and coordinate them into a workable and understandable system. The RSI is fairly new to us, and we see how valuable it can be--not easy, but valuable. On Sunday evening, I was at the computer, playing around with the RSI and made a list of 10 stocks that showed potential to the upside (figuring correctly, that this would be a recovery week). Out of that list of 10, the final cut got down to 2 that looked the best. Of the 2 there was one that seemed better than the other one. Here they are, in order of their selection. BWS at 49.35 (our #1 pick), and APH (a splitter, too) at 63.22. This weekend I will probably look over a new list--for up or down plays.

We have been striving to find plays for interested readers that are potential profit makers in up or down plays. We think we might be moving along on the right track. It is satisfying to note that when the indexes are moving up and we show a down play, because of earnings, etc., the majority of the plays do go in the down direction--bucking the general market. The same when the indexes are moving down and we pick an up play. You can visit the Past Results and look at the Momentum plays to see what we are talking about. For instance Wed., 3/7 was a down day for the indexes. Our trade was in PSS to the upside and it was a nice winner. In addition, CHS was a potential play to the upside.

The day's range in the CALLS for PSS was 3.10 to 4.50 and for CHS (which we missed) was 1.65 to 2.80. Plenty of room for profits when you aren't greedy and are looking for 30 cents to 75 cents, depending on the movement in the stock. The Momentum 2 study also works on the belief that we can profit by up or down moves. The RSI is following right along, too. These are exciting times, and we feed on working hard by the emails that come in to say how well our team members are doing overall.

 Today's Thought---
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Seat belts are not as confining as wheelchairs.




Mike

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