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Strategies & Market Trends : Market Gems:Stocks w/Strong Earnings and High Tech. Rank
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To: LastShadow who wrote (1647)7/8/1997 12:58:00 PM
From: LastShadow   of 120523
 
Split Strategy: CPG, et al

High dollar, stable companies like CPQ, DELL and INTC are all due to split shortly. One strategy I mentioned to Raven this morning in the Rttraders' chat goes as follows:

CPQ will have a 5 for 2 split on July 15. Buy as low as you can before 7/12. I estimate that the stock could jump as much as 10% during the morning trading on the day of the split. There will be a certain bounce as investors look to get into CPQ at this price. Assuming the stock closes at $120, I would set a Stop at $53 (equivalent to $137.50 pre-split for a $12.50 gain per share, or $5 gain post-split prices). If the stock rises beyond 10% it will correct intraday. If it doesn't reach that amount, one will have the opportunity, even using delayed quotes, to sell at market near the local maximum mid- morning. If it begins a rebound after the late-morning correction, then you can rebuy and watch for a leveling point to sell or hold if you wish to accumulate for longer term. This will also work for tickers like DELL and INTC, although those two I would hold for growth. The reason for buying before the split is that market activity on the day of the split will be burdened with pre-open and online brokerage trades from the previous night. The caveat is to get the best pre-split price you can and set a stop you would be comfortable with based on your objectives. I bought last week Monday for $100, but I feel there is still plenty of opportunity given the recent climb.

lastshadow
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