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[Gd2Aussie3]

Reasons Why Stock Splits Increase Profits For Investors

>> The stock split announcement draws attention to a company's success. This results in increased buying and higher prices.

>> Companies will often report high earnings and raise dividends at the same time they announce a stock split. The synergy of these events can drives the price of the stock up even more.

>> The reduced price per share after companies split a stock attracts many smaller investors.

>> With so many news and information services reporting stock splits, the announcements themselves have become a market-moving force.

Stages Of A Stock Split

Studies at RightLine show that the "typical" life cycle of a splitting stock can be dissected into six major categories:


PRE-ANNOUNCEMENT

* The RightLine Report High potential stock splits in every issue.

Stocks usually enter this stage quietly and without fanfare after a long period of healthy growth. However, in some cases emergence into the Pre-Announcement stage occurs quickly, as a unexpected windfall causes a rapid increase in the stock price. This stage of a stock split is often associated with significant appreciation in share price.. The key to profiting from this stage is being able to determine which stocks are the most likely to split and when.

ANNOUNCEMENT The upbeat atmosphere of a stock split often pulls in a large number of new buyers. This influx of traders and investors can lift the stock price higher, giving exceptional gains for those positioned in the stock prior to the split stock announcement. For those who are not in the stock before the split announcement, this stage usually offers low-risk setups for timing short-term trading entries.

DORMANCY There is generally a return to normal price behavior in the weeks following a split announcement as the initial interest subsides. The shorter the time between the announcement and the split date, the less subdued this stage will be.

PRE-SPLIT RUN For many stocks this is the most powerful phase of the split cycle as investors dramatically bid up the price of the limited supply of shares.

THE SPLIT The day of the stock split provides more investor awareness of the already well publicized stock 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 can push prices even higher.

POST-SPLIT After the last buyers are in, investor excitement for the split stock can begin to fade. Prices will often retreat for a while as shares are sold to lock in profits. This stage of a stock split can deliver excellent shorting prospects. While some split stocks will pullback and consolidate for a while, strong performers often dip, quickly rebound and then continue to fly higher.
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Hope this helps any one who isn't familiar with splits or, those that may need a brush up.

G' day Mates,

Aussie