Pre-Announcement - Stocks tend to climb faster than usual during the 60-day period prior to a split announcement, and even that rate of increase will normally accelerate during the final 30 days before the announcement. Many traders play this phase by taking positions in split candidates at specific entry levels recommended in the RightLine Report. Others will scan the list of RightLine split candidates, and choose entry points based on their own individual criteria. The key to profiting from this stage is being able to determine which stocks are the most likely to split and when.
Announcement - Stocks often jump sharply on the split announcement, and may continue to increase in value during the following few days. RightLine email split alerts can give short-term traders who have yet to enter the stock a quick head start on a potential two or three day hold. The emails also serve as notice to those already playing the Pre-Announcement phase to check their positions and move stops higher to lock in profits.
Dormancy - A few days after the announcement, stocks will usually begin to drift into a "dormancy phase." This is when the stock will level off and consolidate its recent gains. However, exceptionally strong stocks in a leading sector may not go through a dormant phase as they continue to power higher. The shorter the time frame between the announcement and the execution date, the shorter the dormant phase. It can be a very bullish force when a stock announces a split just a short time before the execution date.
Pre-Split Run - When a stock nears its split execution date, it tends to pull out of the dormancy stage, and accelerate as it heads into the split. This transition will start anywhere from 5-15 trading days before the execution of the split and includes the stock split record date. This five to fifteen-day window is an approximate period. The actual time depends upon the individual stock, the overall market condition and sector performance. This typical price acceleration is why we include a list of upcoming split execution dates in the weekend issue of the RightLine Report. However, we don't necessarily wait for the weekend to introduce specific entry levels for stocks that are beginning their Pre-split Runs. When the stock is ready to go, so are we!
Split Execution - Stocks generally move higher quickly as they begin trading at the post-split price. The day of the stock split provides the final announcement to the public that the stock has split. Many investors who watched the stock rise at the announcement and again during the pre-split run will now buy shares at the lower split prices. These final buyers often push prices even higher.
Post-Split Depression - Once the initial excitement of the split fades away, the stock typically declines on lower volume for a period of time. This period will often provide short-sellers with a low-risk opportunity to profit from a brief pullback.
Opinions expressed on this board are just that. Opinions. We are not a licensed brokers. Trading strategies discussed on this board are often high risk and not suitable everyone. If you are losing money in the market, you may wish to seek the advice of a licensed securities professional.
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Please do your own due diligence before buying or selling any security in the open market, there are no guarantees.