Stock Split Candidate Checklist

Category: Finance.

Before you can play a stock split you must have a stock split candidates list.

Start with the stocks that you currently are watching and ask the following questions: Has the Company Split Before? This is where you have to do a little research. Has the company done a stock split in the last three years? How many splits have there been in the last ten years? Has it done more than one? Look at the company s stock split history can you see a pattern?

Is it at a consistent interval, like every 18 months, etc, every 3 years. How often do they split? Do they split in the same quarter? Do you notice anything else? Or the same month? Any other pattern?

Check to see how fast the stock moved before the actual split. If the company has a history of splitting, look at how it performed. If there is more that one split you can probably see some common behaviors for the stock. Or at least you may have a clue that the market will expect a similar behavior and the stock price will reflect the expectations of the masses. Using history you can predict how the stock might behave this time if it splits. For example, if a stock has moved up 20 points in the two weeks before a split, for the last 5 splits.

Check to see how fast the stock moved before the split or how it moved( up and down) . You can expect a potential 20 point move in the two weeks before this split too( if a split has been announced) . If there has been more that one split you can look for patterns in stock performance. By using history to predict how the stock might behave this time you could time your trades to take advantage of the historically repeating stock prices. There might even be a pattern of upward movement prior to the actual stock split announcement. This is a great tool, because you are not the only person who has charts and historical information, everyone has them! Of course wisdom and self protection is always required, especially if the stock fails to move as expected.

If there are obvious patterns, you can predict how other investors will act, which lets you capture profits, because you know what to expect. For example: You looked at a chart of the last 10 years if the stock moved up 20 points in the two weeks before a split, for the last 5 splits. You can consider getting into the play when it makes sense, and then have fun because the stock will probably move 20 points this time too, unless news or conditions cause a problem. Do you think that the stock will move at least 20 points this time? What If The Company Has Not Split Before? I figure that when a stock price reaches$ 80 to$ 100 it s a good candidate for a split.

If the stock does not have a history of splitting there is a rule that I use. Especially if the stock has never been that high before. The thinking is" I can purchase 200 shares of XYZ because it is$ 4I d like to get ZZZ but it is$ 90 and I can barely afford 100 shares. " By splitting 2: 1( two- for- one) ZZZ s$ 90 stock will only cost$ 45 per share. Most companies prefer to have their stock under$ 80 because it seems more affordable to investors. Now it fits the price range of more people. People tend to like the idea of owning 200 shares of something much more than only having 100 shares.

Of course 100 shares of a$ 90 stock is identical to 200 shares of a$ 45 stock, but it s not the same emotionally. In other words, it s just a psychological thing and it does not really change anything else. What are some of the indicators that let us know a company may be ready to split their stock? Stock Split Candidate Checklist. A Direct Announcement, this would make the prediction a fact Stock has reached its historical stock split price range Company has reached their annual split announcement date Recently other companies in the sector have announced splits A Shareholder Meeting is scheduled that will vote on an increase in authorized shares A Board of Directors Meeting is scheduled Stock has excessive Turn OVer Rate( increased volatility, or higher stock, increased volume option activity) The stock price is high. Now that you have your stock split candidate list, you are ready for the next step.

Continue Your Education. Note that it is NOT placing the trade. Your game plan will answer questions like: When should I enter? You first must create a game plan for your trade. When should I exit? What do I do if the stock moves against me? When do I take profits?

Only after you fully understand the trading strategy and have a game plan for all situations are you ready to trade. Happy Trading. and by the way don t forget to check out my upcoming online web class to be spoon fed the hottest trades available" UPCOMING POWER PROFIT PLAYS" . If you would like to learn more about my trading philosophy I invite you to attend my trading workshops in person or participate in my free online trading seminars. Darlene with BetterTrades