I wrote a post in early April, NMX Trading Decision: Shares or Options, and explained that I was looking to purchase call options: $130 Jan 08. I placed the order with a contingency but cancelled while on vacation because I didn’t want to worry about open positions that could hurt me. However, I did buy the 130 Jan 08 options when I returned from Hawaii but I paid a higher premium than I originally wanted. I ended up paying $13.50 for one contract or $1,350 cost basis (all I wanted was control of 100 shares for as little money as possible).

The options dipped to a low of $10.20 last week (stretching to my stop loss limits in my account) and I was about to pull the stop loss trigger but I sensed strength among the options in relation to the actual share price. In addition, I saw that the weekly candlestick chart showed two consecutive weeks of positive reversals above the young trendline. Therefore, I decided to stick with the position because my original plan was to hold until the early winter of 2007.

These same options blasted 100% higher over the past week and now show a 51% gain in my portfolio. The bid/ask closed at $20.20/$20.50 yesterday or total of $2,020. The stock is up more than $15 over the past three trading days and volume has exploded. With heavy action today, it will become the strongest accumulation week since the debut of the IPO (minus any unknown negative events). This is excellent action and can be a sign of things to come over the next six months so I will be sitting tight with my options. My research still shows a possible move to $170 by the end of 2007. This type of move would give the option a theoretical value near $40 (or $4,000). Early bid/ask numbers are in the $140 range so we will see where this thing goes!

The position could have been more lucrative if I had listened to my friend Ty who wrote this in the comments section of the original post:

“Hey Chris,
great post and research as always. I think the long calls could make a great play. You are probably going ATM or ITM (80-85 Delta?) I would guess, depending on where and when you buy it, but if you are going slightly OTM and you think it might take a while to move, have you considered doing a calendar? If you get an 08 with lots of extrinsic value, and its slightly OTM, you could sell a front month call against it and lower the cost of the 08 significantly. This could also work if it pulls back after you buy it and it looks like the pullback could be prolonged, like a month or so at least. You could sell a front strike 30 days or less out and collect some premium before it resumes its move. Just some “options” to go with your, options!”

That would have been great but I didn’t do it.

Here was my analysis and a few quotes back in early April 2007:

“Dealing with possibilities; NMX could make a 50% run over the next year based on institutional accumulation and the success of sister stocks such as CME, BOT & ICE. I am not in the business of predictions so I can’t tell you if NMX will follow suit.”

“So, instead of buying a lot of 100 shares for $13k, I am thinking about buying one January 08 call option (leverage my money for less exposure).”

“I am looking to place a market order for 1 Jan 08 call option with a current ask of $12.20 or $1,220 (for control of 100 shares). I am also thinking about placing a market order to buy this same call with one contingent: the actual asking price must be trading lower than $125 (good til cancelled) while I go on my trip. It’s not much of a difference so I may just place the trade after posting this entry but a further correction is also a possibility (down towards $122-125).”

UPDATE 6/15/07 9:35 am:
Nymex reportedly in talks to sell itself
NYSE Euronext, Deutsche Boerse, Chicago Mercantile Exchange said suitors
LONDON (MarketWatch) — Nymex Holdings share rallied in pre-market trades Friday on a report that the parent company of the New York Mercantile Exchange is shopping itself to larger rivals, according to a published report.

Top Nymex executives have met with their counterparts at the three suitors, according to the report, and the board of Nymex has been informed of the talks.

As promised yesterday, I have decided to highlight five young stocks that debuted with an IPO within the last year or so. None of the stocks below are direct recommendations to buy or sell but they are presented with an idea that opportunities may currently exist or become apparent. I have included some basic earnings information along with institutional analysis. Please do your own due diligence prior to committing to any of these securities. The stocks are not listed in order of importance or by potential opportunity; it’s a random list.

All earnings information is Copyright 2007 Zacks Investment Research.
All Institutional Information is Copyright 2007 Vickers Stock Research Corporation (Vickers Security Report)

JASO – JA Solar Holdings, Co. Ltd. - $24.55
Earnings Analysis:
$0.41 - Last Year Primary EPS
$1.00 - Current Year Mean Primary Estimate
$1.41 - Mean Primary Estimate — Next Year
30.00% 5-YEAR GROWTH MEAN EPS

Institutional Analysis:
Total Held by Institutions: 87
Money Market: 68
Mutual Fund: 18
Other: 1
Shares Held: 15.16 mil
Shares Held Previous Period: 1.85 mil
Shares Bought: 13.51 mil
Shares Sold: 0.19 mil
Value of Shares Bought: $314.6 mil
Value of Shares Sold: $4.58 mil

SMOD – SMART Modular Technologies Inc. - $14.31
Earnings Analysis:
$0.68 - Last Year Primary EPS
$0.50 - Previous Year EPS
$0.91 - Current Year Mean Primary Estimate
$1.06 - Mean Primary Estimate — Next Year
17.50% 5-YEAR GROWTH MEAN EPS

Institutional Analysis:
Total Held by Institutions: 149
Money Market: 82
Mutual Fund: 62
Other: 5
Shares Held: 42.33 mil
Shares Held Previous Period: 25.68 mil
Shares Bought: 18.82 mil
Shares Sold: 2.17 mil
Value of Shares Bought: $269.36 mil
Value of Shares Sold: $31.08 mil

Read more »

A few stocks featured on this blog, as recently as last week, are moving higher so I would like to draw attention in their direction. All three stocks were found on my IPO fundamental screen which is explained in detail in this post: Fundamental Screens and Scans.

The first stock is CBEY, one that was highlighted as a Top 10 Stocks to Watch: Trend Buys in March of this year while it was trading below $30 per share. The stock has since made a move to $38 and currently holds a 32 % gain over the past three months. This was a piece of the analysis I gave when it debuted on the blog:

“CBEY – 29.03, the stock has been consolidating over the past four months without violating the 200-d m.a. so that is positive but recent volume has been increasing on distribution days. It is a buy if it holds support above the 200-d m.a.”

LOOP came to us in April of 2007 after I returned from Hawaii. The stock was blasting out of a quadruple top breakout on the point and figure chart just shy of $19 per share. It closed one penny shy of $22 yesterday for a respectable 16% gain in less then two months. The stock has moved higher in seven of the past eight weeks with a clear up-trend above the trading range I highlighted in my original post: Quadruple top Breakout (LOOP)

Here is a taste of the analysis I gave during that original post:

LOOP - $18.93 “LoopNet was screened on MSW back in late 2006 as an IPO to watch in the future and may be starting the run that I anticipated it could take late last year. As we look for red flags on the downside, this green flag on the up-side is one to be noted.

The next major milestone will be a new all-time high above $19.92 (closed at $18.93 today).”

FCSX debuted on the blog last Monday after a nice boost by Cramer’s analysis the prior Thursday and Friday. The stock retreated to $45, an area just above my ideal entry of $42.50 and just above the current 50-day moving average. Yesterday’s 8.23% gain came on strong volume giving us another indication that institutional buyers are stepping in. It may be time to jump on this train before it takes off.
The original blog post and analysis can befound here: FCStone Group Inc. (FCSX)

“Potential Trade Set-up:
Risk a maximum of 1% of portfolio
Set a stop loss near $39.10 or higher (7-10%) with entry near $42.50 gap-up
Target of $63+ based on previous high to low action (pure speculative target)
Risk to reward has a potential of 6-to-1 based on exact entry, target and stop listed above.”

My IPO screener has been very successful this year but I must say that it can and does present me with 30 to 60 stocks every night so I use technical analysis to select the ones I believe will provide the most opportunity. I plan to upload another blog post later today that will feature three new IPOs that are grabbing my attention, both fundamentally and technically.

10:30pm: Was that a great ending?

I agree with the theory that Tony DOES get killed at the end. He gets shot in the cafe and the screen goes black, sudden ending, no noise, no nothing. Tony is dead. His last vision in life is his daughter walking through the door. If that is the case, Brilliant!

As someone said on the internet already “Just as Tony was realizing what was really important in life…. his family…. he gets killed. It’s tragic, because he was a tragic character. He was destined for tragedy!”

“Or you can think he just lived happily ever after…”

On May 24, 2007, I wrote an article titled: Are We Nearing a Top

In that article, I said:
“I am not sure if this WSJ article will signal a top but I tend to agree with Barry that this type of front page coverage has a history of signaling things to come.”

“…keep an eye on this performance chart to make sure the up-trend doesn’t extend too far without a natural pullback”

“The second chart shows the NASDAQ reaching a 28% gain over a year ago which has signaled tops in the past. Eugene D. Brody, from Oppenheimer Capital, was quoted as saying: “Sell stocks whenever the market is 30% higher over a year ago”.”

So, what can we make of the market over the past several days?

• First, the market looks to be making a natural intermediate correction which has been overdue in my personal opinion (remember, the action in the market is only a belief in your own mind).
• Second, the markets are extended (up 25%+) when compared to their levels from last year and I have been highlighting this fact over the past several weeks. Corrections are due when markets move up by 30% over their levels from the prior year.
• Finally, the markets can’t continue to trade too far above their 50-d and 200-d moving averages without making a pullback, even if it only last a few days to a couple weeks. They can continue to trend higher but pullbacks are a must in order to achieve sustainability. Welcome pullbacks and add shares in ideal situations.

If you follow my annotated charts over on stockcharts.com, you may have noticed the fact that the 50-day moving average for crude oil has recently crossed above the longer term 200-day moving average (a sign that oil prices may push higher). The 200-d moving average is still facing south but things are starting to look better which usually means that stocks “as a whole” may be poised to take a breather or actually trade lower.

Let’s take a look at several charts:

The NASDAQ is now trading a few points above its 50-d moving average and has not traded below this line since its last correction in late February 2007. That correction was short lived but did give back 8% in gains as this week’s losses have totaled less than half of that.

I did miss one BIG signal that highlighted a weak market over the past several months: a bearish divergence between the NASDAQ and its relative strength versus the S&P 500. As the index moved higher, the relative strength drifted lower; not a very promising occurrence.

The DOW was down about 3% for the week on above average volume which gives us pure distribution. Looking at the point and figure chart, I see one support level near 13,200 and then a possible free-fall towards 12,800 or 12,750 when overlaying the weekly candlesticks. The 200-day moving average sits near 12,400, an area I would rather not visit at this time.

Do I think the up-trend is over?
It doesn’t really matter what I think when you can follow the indicators above. However, I’ll give you my beliefs: The up-trend is making a natural correction and Wall Street analysts and newspapers are freaking. Corrections such as this are welcomed as they allow investors to accumulate shares in the top candidates before they resume their runs.