Stocks — Page 23

Examine Rochester Medical

July 31, 2007 by Chris 7 Comments

Stock of the Day – Update
Rochester Medical (ROCM)
Monday’s Closing Price: ROCM – $16.44

Sector: Health Care
Industry: Health Care Supplies
52-week Price: $6.85 – $29.76

Well, ROCM is now up almost 20% from its low last week and I don’t own shares!

Why? I had to sell based on my setup. See the trade setups below which turned out to be WRONG. I COMPLETELY understand why they were wrong and it was staring me in the face the entire time; after Dankkir noted the un-filled gap on the charts that I essentially ignored. Well, if we waited more patiently and placed the position when the gap filled, we would still be holding into today’s action with an approximate gain of 16% and earnings due to be released after the market close. I can’t tell you if I would have held through earnings today.

I made a mistake, closed my loss and went back and studied what I did wrong. Therefore, I will be prepared to look for these things in the next opportunity. I placed my first trade over 10 years ago but I still make small careless mistakes but the most important thing was that I didn’t allow it to hurt me! I followed my rules!

This should have been the ideal trade setup:
Ideal Trade Set-up:
Ideal Entry: $14.14 (area where gap was closed)
Risk is set at 1.0% maximum of total portfolio or $1,000 of $100k
Stop Loss is 8% or $13.01 (below the gap area)
Number of Shares: 884
Position Size is $12,500
Risk is $1.13
Target is $21
Risk-to-Reward is 6-to-1

Potential Trade Set-up #1 – WRONG!:
Ideal Entry: $15 (currently $15.14)
Risk is set at 1.0% maximum of total portfolio or $1,000 of $100k
Stop Loss is 5% or $14.25
Number of Shares: 1,333
Position Size is $20,000
Risk is $0.75
Target is $21
Risk-to-Reward is 8-to-1

Potential Trade Set-up #2 WRONG!:
Ideal Entry: NOW (currently $14.75)
Risk is set at 1.0% maximum of total portfolio or $1,000 of $100k
Stop Loss is 5% or $14.01
Number of Shares: 1,356
Position Size is $20,000
Risk is $0.74
Target is $21
Risk-to-Reward is 8-to-1

*This trade setup could have worked with a 10% stop loss.*

Filed Under: Stocks, Technical Analysis

Omniture (OMTR) Makes New High

July 27, 2007 by Chris 5 Comments

Stock of the Day
Omniture, Inc
Thursday’s Closing Price: OMTR – $25.96

Sector: Technology
Industry: Business Software and Services
52-week Price: $7.35 – $26.28

Market Wire: Omniture, Inc. (OMTR), a leading provider of online business optimization software, today announced results for its second quarter ended June 30, 2007. Omniture reported another record revenue quarter, with second quarter GAAP revenue of $33.5 million, an increase of 78 percent over the second quarter of 2006 and 15 percent over the first quarter of 2007. Non-GAAP revenue for the quarter was $34.1 million.

My Take:
The charts look great, especially when compared to many of the market leaders over the past week or so. The weekly chart shows a strong price and volume move into new all-time high territory while the point and figure chart shows several consecutive ascending triple top breakouts.

I have also been looking deeper into the numbers with this stock. Revenues are steadily increases quarter over quarter and year over years (as you can see in the breakdown below). Earnings were negative last year but fell within analyst expectations and are expected to turn positive going forward from an actual loss of ($0.08) in 2006 to a profit of $0.65 by 2009. A typical growth stock usually rises in price as earnings make strong gains from year to year. Net income was still negative last year but the negative numbers decreased by 55% as it heads to positive territory. Overall, things are looking positive both fundamentally and technically so I will now setup an ideal trade opportunity.

Potential Trade Set-up:
I would risk 1% of the total portfolio
My ideal entry would be near $24
Set a stop loss of 10% or near $21.60 ($19.89 would be the best area with a lower entry)
Target price will be about $35 (complete speculation)
At $35, the risk-to-reward will be just above 4-to-1
At $30, the risk-to-reward declines to 2.5-to-1

So, a $100,000 account will give you
Entry: near $24
1% Risk: $1,000
Stop Loss: 10%
Position Size: $10,000
Shares: 417
Stop Loss: $21.60
Target: $30-$35

Institutional Analysis:
Held by Institutions: 45 %
Money Market: 56
Mutual Fund: 82
Other: 4

Shares Held: 30.33M
Shares Held Previous Period: 24.25M

Shares Bought: 14.94M
Shares Sold: 8.85M
Value of Shares Bought: $278.0M
Value of Shares Sold: $165.0M

[Read more…]

Filed Under: Stocks

Taking Partial Profits

July 19, 2007 by Chris 7 Comments

It’s been a quiet week and I have been having some issues with my blog. The home page loads quickly but the all other pages are taking extra time to load (much slower than normal). My host is looking into the issue as it is not the theme since it happens with every theme I try (not the plug-ins either). Let me know if anyone has a suggestion as to what it may be (mySQL, database, etc…?).

It’s the summer and volume is typically quiet and profits have been very handsome in 2007 so I started to sell shares yesterday in JASO. After doing my research last night, I have decided to take down at least half my position in four other holdings:
BIDU, EDU, LOOP and MA

See the attached charts to understand why I am looking to capture gains. I see many leading stocks showing some exhaustion signals and far too many of them are extended from their 200-d moving averages. I am not taking down my entire position as I would like to allow profits to run further if this up-trend has another leg. Some may think that is greedy but I am not concerned because my sell stops are in place so I won’t get hurt if they continue to reverse.

My plan is simple: realize a portion of gains while allowing for further gains but protecting what is left on the table. I am also taking profits because my objective in each trade above has been exceeded.

Leave a comment and let me know what you are doing with your positions (buying, selling or holding).
What you are thinking and what is your plan at this point in time?

Filed Under: Selling, Stocks

Support and Resistance

July 17, 2007 by Chris 4 Comments

Stock of the Day – Update
Rochester Medical (ROCM)
Monday’s Closing Price: ROCM – $14.75

Potential Trade Set-up:
Ideal Entry: NOW (currently $14.75)
Risk is set at 1.0% maximum of total portfolio or $1,000 of $100k
Stop Loss is 5% or $14.01
Number of Shares: 1,356
Position Size is $20,000
Risk is $0.74
Target is $21
Risk-to-Reward is 8-to-1

I am providing this potential trade update with the latest trade setup that allows the previous gap-up to be considered (pointed out by a reader: dankkir, “nobody here mentions the gap at 14.19 which needs to get closed before any long term upside…its just another 5% away“). The entire trade has the potential to fall apart if the overall market starts to tank so be ready to cut losses. However, don’t anticipate anything; follow your rules and the trade parameters.

Take a long look at the support and resistance line on the point and figure chart provided. It tells me that the stock is going to blast higher for a triple top breakout or get slammed lower for triple bottom breakdown.

Too bad we can’t play options here (not offered) because I would trade a move and wouldn’t care what direction it went in, as long as it moved. As Taylor says: “Looks like it’s about to fall off a cliff to me.” If that were the case, a straddle would work.

I would create a straddle – remember; I am not a great option’s trader so don’t listen to what I am saying as I am still learning (please chime in if you see a better strategy using options if they were available in this case)!

Long Straddles (definition from optionsXpress):
Have you ever had the feeling that a stock was about to make a big move, but you weren’t sure which way? For stockholders, this is exactly the kind of scenario that creates ulcers. For option traders, these feelings in the stomach are the butterflies of opportunity. By simultaneously buying the same number of puts and calls at the current stock price, option traders can capitalize on large moves in either direction.

Here’s how this works. Let’s imagine a stock is trading around $80 per share. To prepare for a big move in either direction, you would buy both the 80 calls and the 80 puts. If the stock drops to $50 by expiration, the puts will be worth $30 and the calls will be worth $0. If the stock gaps up to $110, the calls will be worth $30 and the puts will be worth $0.

The greatest risk in this case is that the stock remains at $80 where both options expire worthless.

Filed Under: Point and Figure, Stocks, Technical Analysis

Rochester Medical (ROCM)

July 10, 2007 by Chris 13 Comments

Stock of the Day
Rochester Medical (ROCM)
Monday’s Closing Price: ROCM – $15.28

Sector: Health Care
Industry: Health Care Supplies
52-week Price: $6.85 – $29.76

The company develops, manufactures and markets a line of latex-free and PVC-free urinary continence and urine drainage care products. Eight of the past eleven quarters have reported higher earnings than the same period from the previous year.

The stock is not covered by many analysts and is thinly owned by institutional investors as you can see below. Add this to a small float and we have a stock that can pop at any time just as it did earlier this year. Based on the trade setup I presented yesterday, I have decided to develop two daily charts that explain the potential price targets in greater detail. The first chart shows a target zone based on the gap-down area from late April and early May. Can the stock trend higher and fill this gap? If so, we have a nice 50% gain on capital invested and a solid cash increase based on risk (potential 7R trade).

The second chart overlays Fibonacci retracements and shows an identical target zone based on the 38.2% and 50% retracement levels. None of this is an exact science but it gives us an educated guess as to where the stock could move if it starts to trend or even pop. The stock is trading between the 50-d and 200-d moving averages and looks to be trading sideways in a suspicious manner. I have no idea what is going on after the huge run-up and breakdown earlier this year but I like the risk-to-reward setup. This is what I wrote yesterday when I first screened the stock:

Late Buy Opportunities:
“Rochester Medical (ROCM) has had one heck of a year as it blasted higher from $7.50 to as high as $29 in six months of time. Since the peak, the stock has corrected by 50% over the past two months and is now trading with a suspicious quietness above the 200-d moving average. Is there some type of news that will be released that will propel this stock higher? I don’t know but the trade setup is ideal so take it. Something may be going on behind the scenes so take the nice risk-to-reward setup.”

Institutional Analysis:
Held by Institutions: 21%
Money Market: 40
Mutual Fund: 15
Other: 1

New Positions: 27
Positions Sold: 2
Shares Held: 2.7 mil
Shares Held Previous Period: 2.1 mil

Shares Bought: 1.5 mil
Shares Sold: 0.9 mil
Value of Shares Bought: $22.7 mil
Value of Shares Sold: 14.1 mil

Top Institutional holders, Shares Held:
Oberweis Asset Management Inc., 413,650 shares
Dimensional Fund Advisors Inc., 281,774 shares
Allianz Global Investors of America L.P., 200,000 shares
The Vanguard Group, Inc., 166,467 shares
Bridgeway Capital Management, Inc., 152,800 shares

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Filed Under: Stocks, Technical Analysis