Tim Bovee, Private Trader

CLMT: Hydrocarbon cognac

2012-02-17T11:36:00.000-08:00

Calumet Specialty Products Partners L.P. (CLMT) claims to have the "most diverse specialty hydrocarbon capability in the world" with "a full line" of napthenic and paraffinic oils, aliphatic solvents, white mineral oils, petroleum waxes, petrolatum and hydrocarbon gels.

The only thing I recognize on that list is the petrolatum. That's the petroleum jelly that I put on my feet and fingers when they crack in winter.

So Calumet is a company that immediately sends me on a Wikipedia crusade to try to figure out what it does.

Basically, Calumet sells the hydrocarbon equivalent of cognac. Its products are no simple red table wine for the masses, but rather they have been distilled into diverse liquors of the finest quality for highly refined niche palates.

Naphthenic oils burn a lot and are the most volatile part of crude. Paraffinic oils are solid at room temperature and are far less volatile. Aliphatic solvents lack a benzene ring, in contrast with aromatic hydrocarbons....

Well, you get the picture. The company makes and sells stuff that other companies appear to need, and that I as a trader will never understand well. It has something to do with oil.

CLMT had the most bullish chart of 15 stocks added today to the Zacks top-buy list. PVX was the runner-up. DSW and RUE completed the final four.

Based in Indianapolis, Indiana, CLMT began its most recent leg up on Feb. 6 from $21.09, rising to $23.34 today, a level that brings the price above its previous higher high of $22.97. In other words, it counts as a breakout.

The rise is part of a longer-term uptrend that began Oct. 4, 2011 at $16.33 and was broken by two significant corrections.

From a very long term perspective, the price has been trending sideways since early 2010 and can be interpreted as having completed two peaks in a messy head-and-shoulders pattern. The price at present is approaching a third peak, with the head having three tops: $24.95, $23.75 and $23.95.

That triple-headed beast provides plenty of resistance less than a dollar and a half away from current levels. And by the way, if it is a functioning head-and-shoulders pattern, then it implies that CLMT is heading for a fall down to $5 a share.

I don't put a lot of trust in head-and-shoulder patterns of this magnitude, but still, the implications do give me pause.

Return on equity was 15% in mid-2011, and debt was high, amounting to 122% of equity. Quarterly earnings are a mess, quite frankly. The company has come in below estimates in nine of the last 12 quarters, including the most recent.

Institutional ownership stands at 12%, a miniscule level. The price is very low. It takes only 38 cents worth of stock to control a dollar in sales.

The stock trades 200,000 shares a day, and that low liquidity is reflected in the somewhat limited options selection. Open interest is grouped tightly around the at-the-money level, with no open interest at the fringes.

Implied volatility, at 36%, stands at its lowest level of at least the past six months and is dropping sharply. The volatility shows that traders give a 68.2% chance that the price will close between $20.86 and $25.66 a month from now.

The next earnings announcement is scheduled for May 4. The stock goes ex-dividend sometime in May. It has a high annual yield, 9.11%, paid quarterly.

Decision for my account: I'm passing on CLMT because of the near-term resistance on the long-term chart, because of the low liquidity and because of the lack of institutional ownership. A break past $24.95 would prompt me to revisit the decision.

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

CCJ: Fueling the nukes

2012-02-17T10:49:00.000-08:00

Cameco Corp. (CCJ) mines uranium, refines it and processes it into fuel for nuclear power plants.

As it becomes clear that the wind, the sun and biomass won't provide enough energy to replace fossil fuels, nuclear increasing looks to be one possible future. Cameco, from its base in Saskatoon, Saskatchewan, Canada, is positioned to profit from that future.

Every company is a narrative, and its stock is an avatar for the story. Cameco's narrative plays on optimism and hope. Energy. The future. Turning away from fossil fuels and the political/environmental baggage they carry.

It is easy to lose sight of the fact that Cameco is an extractive industry dealing with a commodity that carries its own heavy load of political and environmental baggage I treat oil stocks with extreme caution because so much of what happens to the companies depends upon political decisions outside of corporate control. Likewise, uranium.

CCJ had the second-most bullish chart of 16 selected at random from 675 large-cap stocks. The most bullish chart belonged to CMG, which I analyzed on Feb. 8. I've chosen CCJ to avoid the repetition. DG and NXPI completed the final four.

CCJ's chart began its current rise from $17.39 on Dec. 29, 2011 to today's high of $24.10.

The uptrend followed a shattering decline from a peak of $44.81 in February 2011. From a very long term standpoint, CCJ has been tracing a triangle since 2007. That's a fancy way of saying that it has been trendless amid swings of decreasing magnitude.

There is, of course, money to be made from those swings.

From a micro-level, the price rose sharply since December into late January, and then stalled and corrected down to around $22. What makes the chart attractive is that today the price broke above the $24.08 correction high for the first time. It pulled back intraday to below $24, and the question will be whether the breakout will follow through.

Analysts say CCJ is a strong sell. From a cursory glance at the financials, that assessment is puzzling.

Return on equity is 9%, a respectable level for a workaday company. Long-term debt stands at 21% of equity, which is quite good.

Institutions own 64% of the shares -- not top rung, but it shows that there is some interest among people who manage vast quantities of money. In fact, they like it so much that they've bid the price up so that it takes $3.88 in stock to control a dollar in sales.

Earnings are all over the place, but that is to be expected from a minerals operation. However, the company earlier this month lowered its revenue estimates by 5% to 10%. Some commentators tied that action to doubts over the take-up of nuclear energy.

So it all comes back to the narrative: Will nuclear carry the world to a bright future of clean and abundant energy, or continue as a pariah amid memories of Three Mile Island, Chernobyl and Fukushima.

It strikes me that the analysts are confusing long-term narratives with shorter-term prospects. The market corrected for the revenues estimate over three days, and then reclaimed that territory over three more days. It's done. Time to move on.

CCJ is liquid, with average volume of 2.5 million shares a day. There is a wide inventory of options with three- and four-figure open interest across the board.

Implied volatility, at 35%, is at six-month lows for CCJ and declining further. The volatility shows that traders give a 68.2% chance that the price will close between $21.44 and $26.20 a month from now.

The next earnings announcement is scheduled for May 5. The stock goes ex-dividend on March 28 for a quarterly payout worth 1.68% annualized.

Decision for my account: I'm passing for now because the price withdrew below the breakout level. I'll revisit the decision upon a persistent breakout above the $24.08 level. The strongly negative analyst assessment give me pause. I'm not sure they're right, but what do they know that I don't? (Answer: Probably quite a bit.)

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

BEAM: Spiritual trade

2012-02-16T11:20:00.000-08:00

Beam Inc. (BEAM) is the old Fortune Brands Inc.

When I saw the ticker, I figured it had something to do with huge cranes moving weighty chunks of iron into place. It turns out that it is Beam as in Jim Beam whiskey, one of many well known brand names held by this Deerfield, Illinois company.

Besides Jim Beam, the company owns Maker's Mark and Canadian Club whiskeys, Courvoisier cognac and Sauza tequila.

The old Fortune Brands had its fingers in a wide selection of pies: Staplers for the office, hole punchers, golf gear, cabinetry, faucets, padlocks and booze.

Last year Fortune decided to go lean. It sold everything except its liquor products, and remains as a totally spiritual component of American commerce.

The new BEAM, then, is company that lacks a long history. Despite the established nature of its product line, its chart is that of a start-up.

It opened on Oct. 4, 2011 at $43.55 and since then has stair-stepped higher.

The most recent leg up began at $50.49 on Jan. 5 and hit an all-time high today of $55.85 (so far).

There is a lot to like about the chart. The price is in blue-sky territory, although that means less for a chart with so little history. The volume has risen with the price. Even the steep macro corrections have managed to stay with higher lows rather than taking out prior lows.

BEAM had the most bullish chart of 16 selected at random from 675 large-cap companies. HSP was the semi-finalist. BF/B and NUE completed the final four.

The analyst consensus on BEAM is mid-term neutral, and that's not surprising. Return on equity is just 3%, and the debt is on the high side, at 47% of equity.

Institutions are staying away -- they have no significant positions -- yet the price is high. It takes $3.65 in stock to control a dollar in sales.

The stock on average trades 777,000 shares a day, which is liquid. There is a good options inventory, with open interest mainly in the three figures and concentrated within a few strikes of the at-the-money point.

The bid/ask spreads start getting very wide very quickly as the strikes move beyond the money. That really makes BEAM less attractive to me. Given a choice, I always go for the narrow spreads.

Implied volatility began rising on Feb. 9, from 19% up to the present 23%. Today's level remains well below most of the past six months. At that level, there is a 68.2% chance that the stock will be trading between $59.96 and $52.58 a month from now.

Earnings are scheduled for May 2. The stock goes ex-dividend sometime in May for a quarterly payout yielding 1.47% annualized.

Decision for my account: A smooth and mellow chart, but I see problems beyond the candlesticks. The option bid/ask spreads are wider than I like, and the lack of institutional ownership is also a negative. What do the big guys know that I don't? The stock is expensive at more than three times sales.

Despite the attractive chart, I'm passing on BEAM, the stock. Even so, Beam, the whiskey, will remain one of my favorite tipples, with a place of honor in my liquor cabinet.

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

LNVGY: East Asia's IBM

2012-02-16T10:42:00.000-08:00

In the United States, when you're in the market for a plain-vanilla workhorse PC you first thought tends to be HP or Dell. In East Asia, you think Lenovo.

Lenovo Group Limited (LNVGY), headquartered in Hong Kong, China, bought IBM's PC business in 2005. That put Lenovo on the map to become one of the major players in global tech, with customers in 160 countries, research centers in China, Japan and the United States, and a product line ranging from corporate servers down to tablets and smart phones.

LNVGY has been on the rise from $13.42 on Jan 3 up to today's high of $17.93.

The company is traded on the pink sheets in the United States. It has low liquidity and no options. It trades, on average, 65,000 shares a day.

On the Hong Kong stock exchange, where companies are given numbers as ticker symbols, Lenovo is listed as 0992 and today traded 40.2 million shares.

LNVGY had the most bullish chart of 14 stocks added today to the Zacks top-buy list. DW was the semi-finalist. ALC and TRN completed the final four.

LNVGY's Return on equity is 22%, which counts as growth-stock territory. Long-term debt is minimal, amounting to 7% of equity. Institutional ownership of the U.S.-traded stock is miniscule, amounting to half a percent. If the big dudes want to play with Lenovo, they'll do it in Hong Kong, not New York.

The price is dirt cheap. It only takes 34 cents in shares to control a dollar in sales.

For Americans, LNVGY is a way to participate in a major player in Asian tech development, which mainly means China's development, without the hassle of currency dealing required for trading abroad.

The U.S. price moves according to what happens to 0992 on the Hong Kong Exchange, so LNVGY traders will be perpetually on the trailing edge of events.

The absence of options means that there is no way to hedge a position or generate income in fallow times through covered calls.

Decision for my account: I can see LNVGY as a place to park some money in a "long-term play". I like Lenovo as a company. However, I don't do long-term plays on an entry rule. Long-term is what happens due to exit rules. For entry, I dislike Lenovo's illiquidity. I dislike the inability to trade while the Hong Kong market is open. I dislike the lack of options for hedging. For those reasons, I'm passing on LNVGY.

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

CMI: The glitter of engines

2012-02-15T11:06:00.000-08:00

Cummins Inc. (CMI) makes engines. Gas, diesel and natural gas engines, electric power systems, components used in manufacturing and servicing engines. The Columbus, Ohio company sells in nearly 200 countries globally. (Since there are 206 sovereign states, Cummins pretty much as the world covered.)

CMI began a sharp rise on Jan. 3 from $90.45 after a gapping above the prior day's close. It rose to an all-time high today of $123.18 with only one shallow correction.

The company had the most bullish chart of 16 selected at random from 675 large-cap stocks. DVA was the runner-up. CPL and XLNX completed the final four.

I don't think of engines as being a go-go business filled with glitter and excitement. I don't think of engines as being the iPad. But with a return on equity of 37%, CMI stands just 8 percentage points below AAPL, so it is up there partying with the glitterati.

It has quite low long-term debt, amounting to just 12% of equity. Institutional ownership stands at 85%, and the price is still fairly inexpensive. It takes $1.30 in shares to control a dollar in sales.

Analysts overall rate the company a buy.

The next earnings announcement is scheduled for May 1. The stock goes ex-dividend on Feb. 21 for a quarterly payout yielding 1.31% annually.

The company has good liquidity, with an average volume of 3.1 million shares a day. The options inventory is wide, the open interest is quite high, and the bid/ask spread is acceptable for such a high-priced stock.

Implied volatility at 36% is at historic lows but has been trending upward since Feb. 1. Given the low volatility, my trading instrument of choice would be long options.

Decisions for my account: I bought calls for June expiration with $115 strikes.

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

DFS: #3 tries harder

2012-02-15T10:35:00.000-08:00

Discover Financial Services (DFS) is the Discover credit card. Also the Diners Club card. Also, it owns a bank and the PULSE payments network. I think of Discover as being one those companies that could proudly declaim, "When you're #3, you try harder."

This is a not a company that the Oracle of Omaha, Warren Buffett, would love. He wants #1 companies with the clout to dominate their respective markets. He's a Coke guy, not Pepsi. A Wal-Mart guy, not Target.

The Riverwoods, Illinois company Discover, ranking below Visa and Mastercard, is far from controlling its market. It is a smaller fish buffetted by bigger fish's waves.

DFS took off on a steep uptrend from $24.75 on Jan. 10 and, with two small corrections, rose to today's high (so far) of $29.35, its highest point since it was spun off as an independent company in 2007.

As has been common throughout the markets this year, the rise was accompanied by declining volume.

DFS had the most bullish chart of 21 added today to the Zacks top-buy list. The runner-up was DSW. TAM and KUB completed the final four.

DFS has a return on equity of 30% -- that's wildly profitable. However, it is ridden by long-term debt, which amounts to more than double equity. As terrible as that sounds, it is near the mid-range for financial services companies. DFS ranks as more aggressive in using debt than a bit under two-thirds of its peers.

Institutional ownership stands at 88%, on the high side, and the shares have been bid up to more than double sales parity. It takes $2.14 in stock to control a dollar in sales.

Next earnings will be announced on March 21. The stock goes ex-dividend sometime in March for a quarterly payout worth 1.37% annualized.

The stock is liquid, with average volume of 4.4 million shares, and has a full menu of options with narrow spreads and adequate open interest.

Implied volatility, at 31%, is at six-month lows. My trading vehicle of choice would be long options.

Decision for my account: I've bought calls for July expiration with a $26 strike.

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

ORLY: Under the hood

2012-02-14T11:41:00.000-08:00

O'Reilly Automotive Inc. (ORLY) sells after-market parts, tools, supplies, equipment and accessories both to professional auto mechanics and to dudes who like to get greasy under the hood. The company is headquartered in Springfield, Missouri.

ORLY's most recent rise began at $63.75 on Oct. 4, 2011 and carried the price to $85.32 on Jan. 19 of this year. Longer term, the price has been on a steep rise since October 2008.

As a result of the recession, people are holding on to their cars longer, which means greater need for repairs and parts, which means business for ORLY and its competitors. No one who in a position to have a valid opinion expects a swift recovery, so ORLY's market seems safe for awhile.

ORLY had the second-best chart among 34 stocks added today to the Zacks top buys list.

MNST was the champion, but I wrote it up three weeks ago and don't want to repeat the analysis. The stock had dropped off Zacks' top shelf briefly and then been reinstated. Good chart. Good stock. I own it.

IMO and OIS completed the final four.

At a micro level, the price dropped for two days after the mid-January peak, and since then has traded in a slightly upward-trending range.

It will take a push above $85.32 for the stock to return to its uptrend, but the upward bias of the correction suggests to me that the breakout will occur.

Return on equity is 17%, nearing growth-stock territory, and the company's long-term debt stands at 28% of equity. That's a bit higher than I like, but still on the low side for specialty retailing.

Institutions love O'Reilly -- they own 89% of the stock and have bid up the price so that it takes $1.83 in shares to control a dollar in sales.

O'Reilly is moderately liquid, with 1.2 million shares traded daily, on average. The problem comes with the options, which have an adequate inventory and three-figure open interest in strikes near the money, but wide bid/ask spreads on some.

Implied volatility is low on the six-month chart, at 25%. That seems too low to justify the wide spreads that I'm seeing on strikes just $5 away from at-the-money.

However, the at-the-money spreads are quite reasonable, both in the near month (March), used for net-credit positions, and the out-month (May) used for net-debit positions. Given the low implied volatility, I would play ORLY by buying long calls for May expiration.

Next earnings are expected on April 27.

Decision for my account: I've bought May long calls on ORLY, with an $80 strike price.

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

TJX: Bargain clothing, bargain stock

2012-02-14T11:01:00.000-08:00

TJX Companies Inc. (TJX) is T.J. Maxx and Marshall's at your local shopping mall. Also HomeGoods and A.J. Wright. THeadquartered in Framingham, Massachussetts, TJX Companies does business in Canada and Europe as well as the United States.

If you're looking for clothes and wanting to save a buck (and who isn't these days?), TJX's stores are the place to go.

Arguably, it is hard times that has kept TJX's stock price rising steadily, from $19.78 since August 2010, in a way that the company's store prices never would.

In fact, looking very long term, the stock began rising from 70 cents in May 1995, and has continued an amazing uptrend interrupted by just two major corrections and two minor ones.

When I look at the chart, I'm troubled by the volume, which shows declining peaks since November on the daily chart and since April 2010 on the weekly chart.

At a micro level, the stock had a five-day correction in mid-January, bottoming at $32.50, and then rose with no correction lasting more than two days to a high of $34.94 on Feb. 8. Since then the price has dropped to lower highs and has traded within a range for four days.

The TJX chart is similar to many that I'm seeing as I screen: A steady rise since last year but faltering since last week.

I could argue that with the economy recovering, people will be moving to more upscale stores for their clothing needs. But I don't think the economic recovery will be that swift. I'm betting that the habit of thrift will remain long after better times return.

The TJX Companies' story suggests to me that it has reasonably sustainable market.

TJX had the best chart of 16 selected at random from 675 large-cap stocks. APC was the runner up. APH and RL completed the final four.

The analysts' consensus regards TJX as a buy, and no wonder, with return on equity of 43% and long-term debt amounting to 25% of equity, which is low for the department- and discount-store industry.

Institutions own 87% of the stock, and the price is only a little above parity with sales. It takes just $1.14 in shares to control a dollar in sales.

TJX is liquid, with 3.9 million shares traded daily on average. It has an adequate inventory of options with three- and four-figure open interest for all but the outlying strikes, and reasonable bid/ask spreads.

Earnings are due out on Feb. 22. The stock goes ex-dividend for the next quarterly payout, worth 1.1% a year, sometime in May.

Implied volatility is on the low side, at 27.4%. but there is a huge anomaly on the chart. Implied volatility stood at 25% on Feb. 3, spiked up to 67% on the next trading day, Feb. 6, dropped to 26% on Feb. 7, and spiked again to 59% on Feb. 8 before dropping back to 28% on Feb. 9.

I don't understand those spikes. They aren't reflected in the price. It could be a rogue computer. It could be something underlying. I don't get it.

Decision for my account: The unexplained implied volatility spikes are a deal killer. I'm passing on TJX. The declining volume also casts doubt on a further price rise. Even without those factors, I wouldn't open a position this close to earnings.

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

ENS: Battery powered

2012-02-13T11:47:00.000-08:00

Enersys Inc. (ENS) makes industrial batteries for global markets.

Its products power such things as electric lift trucks, ground support and mining equipment, and automatic guided equipment. Those last are the behemoths that operate on their own as they follow tapes or lasers through industrial sites. I think of them as robot wannabes.

The Reading, Pennsylvania company's batteries also provide back up power for a large number of enterprises, ranging from sports to medicine.

No battery lasts forever, so ENS potentially has a perpetual market, selling batteries time after time to the same customers, as though they were razor blades.

ENS was the most bullish chart of 22 stocks added today to the Zacks top-buy list. QCOM was the runner up. EHI and EVBN completed the final four.

The price has been on a steady rise from $24.08 on Dec. 20, 2011 and set a higher high today of $33.84. The price has yet to challenge its all-time high of $40.32 set in May 2011, which was followed by a sickening six-month plunge down to $17.50 in August 2011.

ENS is in the enviable position of having respectable returns with low debt. The return on equity is 13%, and long-term debt amounts to just 28% of equity. In a perfect world, I like to see return on equity above 20% and debt below 10% of equity, but the ENS levels are quite acceptable.

Nearly all outstanding shares are in the hands of institutions -- that means the big guys like the stock -- and yet the price is a bargain. It takes only 71 cents of stock to control a dollar in sales.

ENS has moderate liquidity, with 590,000 shares traded daily, on average. The options selection is a bit limited, and only four of the June strikes carry triple-digit open interest.

Implied volatility, although high at 45.8% compared to the broad market, is trading near its six-month low of 40.9%. It has been trending down the past few days.

The high volatility and moderate stock price makes ENS a reasonable covered call play. Fortuitously, we're at prime time for March covered calls, since the Februaries expire next weekend.

Decision for my account: I've opened a March covered call position,buying the shares and selling the $35 strike calls, for a 3% if-exercised return (36% annualized).

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

TDG: Airplane parts

2012-02-13T11:32:00.000-08:00

Transdigm Group Inc. (TDG) makes parts used to build civilian and military aircraft, and then has a continuing market selling authorized replacement parts as long as the airplane is in flight service.

Since airplanes tend to remain in service on average for 30 years, TDG has a stable market.

TDG was the best of 16 charts selected at random from 675 large cap stocks. The runner up was IWR. AMG and DHR completed the final four.

The Cleveland, Ohio company's stock has been on a continual rise from $97.03 on Jan. 23 up to $118.45 last Thursday, Feb. 9. The longer-term weekly chart shows a continual rise from $23.00 in November 2008 up to the current level.

The price moved into blue-sky territory, above all prior trading, in March 2010.

Friday saw a lower high and low compared to the prior day but with an intraday rise. Today's trading has been uptrending within Thursday's range.

So TDG has a strongly bullish chart at all levels of analysis.

TDG is a high performing stock with a heavy load of debt.

The return on equity is 30%, which is high even for a growth stock. The long-term debt amounts to 69% of equity.

The analysts' consensus is that TDG is a buy. Institutions love this stock. They own 98% of the shares and have bid up the price to a high level. It takes $4.44 in stock to gain control of a dollar in sales.

TDG counts as moderately liquid, with 541,000 shares traded daily, on average. Half a million shares generally puts a dent in the options open interest, and TDG follows that pattern.

It has a good selection of strike prices with three-figure open interest on those near the money. But the outliers have no open interest at all.

Implied volatility is 27.5% and has been on the rise since late last week, when it his a six-month low of 21.7%. So my strategy would be to buy options for a net debit. That's good in the case of TDG, since the current out month under my rules, which is May, has ample open interest.

Decision for my account: I've bought call options on TDG.

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

The Week Ahead: Inflation

2012-02-12T11:14:00.000-08:00

Traders will get a look at inflation figures this week, both wholesale and retail. Traditionally, they are studied hard to gain insight into how much the Federal Reserve will tighten credit. But with the Fed committed to an accommodative policy into 2014, odds are good that week's figures will be, basically, free of impact.

For my own trading, I'm far more interested in the expiration of February options next weekend -- Friday is the last trading day -- and the release of the leading indicators.

Day by day:

Monday -- No econ releases.

Tuesday -- Retail sales at 8:30 a.m. Eastern.

Wednesday -- Industrial production at 9:15 a.m., and release of the most recent Federal Open Market Committee meeting at 2 p.m.

Thursday -- The producer price index, jobless claims and housing starts at 8:30 a.m., followed by the Philadelphia Fed survey at 10 a.m., the last being a highly respected regional survey that tracks well with national activity.

Friday -- The consumer price index at 8:30 a.m., and leading indicators at 10 a.m.

Federal Reserve Chairman Ben Bernanke addresses a community banking conference sponsored by the FDIC at 9 a.m. Thursday.

Lesser Fedsters on the calendar: Philadelphia Fed Pres. Charles Plosser gives a speech at 8:45 a.m. Tuesday and Dallas Fed Pres. Richard Fisher at 9:15 a.m. Wednesday.

Both make economic policy from their seats on the Federal Open Market Committee, and both are members of the Gang of Three, who dissented last year in votes on expanding the money supply to encourage economic growth. (The third Gang member is Minneapolis Fed Pres. Narayana Kocherlakota.)

The best part about FOMC minutes, such as those to be released on Wednesday, is skimming down to the voting results at the end and seeing who's playing hardball and who's playing nice.

Fisher and Plosser both took office under Pres. George W. Bush. Fisher has ties to former secretary of state Henry Kissinger's advisory firm. Plosser has consulted for a number of corporate household names, such as hase Manhattan Bank, Eastman Kodak Co., Wyatt Co., ViaHealth Inc., RGS Energy Group Inc. and Chase Manhattan Bank. He also co-chaired the Shadow Open Market Committee, which second-guessed the Fed’s monetary policy.

Practical trading: By my rules, as of Monday I can trade March vertical, calendar, diagonal and butterfly spreads, iron condors and covered calls, and May singles and straddles. Of course, shares are good at any time.

Good trading!

The Market Trend

2012-02-11T15:33:00.000-08:00

The S&P 500 dropped when the U.S. stock markets opened on Friday, an event that was followed by a run of scary headlines and emails:

"Stocks' worst day of 2012: Market drops on Greece snags" -- USA Today

"Stocks fall sharply as Greek deal is held up" -- Fox News

"The S&P 500 is Overbought" -- Personal Finance Weekly

Some facts:

The market opened at 1351.21, down half a percent from the prior day's close.
At the its greatest, 1337.35, the intraday decline was 1% below the open.
The first three minutes of trading accounted for 84.5% of the decline, down to 1338.77.
The index subsequently spent only 36 minutes out of a 6-1/2 hour day below the low of the first three minutes of trading.
The net loss for the day was 0.6%.

I use the S&P 500, in combination with its volatility index, the VIX, as my indicator of overall market trend. For trading decisions, I analyze stocks individually. But for screening purposes, I look for stocks that are in line with the broad market trend.

If I'm bullish the market, I look for bull plays; if bearish, then bear plays.

I've been near-term bullish the market since late December. There is nothing in Friday's trading to make me change my mind. I'm still bullish.

Friday's close is within the range of trading on Wednesday, Feb. 8, only two days prior. Although Friday's range constitutes a lower high and lower low compared to the prior day, it is a higher high and low compared to Tuesday, Feb. 7, which is three days prior.

And in fact, daily declines of this magnitude happen all the time.

Just eyeballing a six-month daily candlestick chart, I can find 25 declining days of greater magnitude than happened on Friday.

What would change my mind about market direction?

The previous correction low on the daily chart was 1300.49 on Jan. 30. A decline below that level would mark a lower low and would change the trend. That is 3.1% below Friday's close.

Now, having made the "don't worry be happy" pitch, I'll add two caveats.

The VIX, which is bearish when it rises, on Friday took out its most recent correction high of 20.33%, breezing up to a daily high of 21.98%, where it stood in mid-January. Much of the VIX's rise came in the last hour of trading, in contrast to the front-loaded S&P 500.

The VIX could well be a harbinger of future bearishness.

In my daily chart screenings, I've noticed fewer stocks that are unabashedly bullish. There is a random element in my selection, so it may well be just a question of chance. Or it could be that the times they are a changin'.

At this point, I'll continue to hunt for bullish charts. But as always, I'll keep my stop/losses current in the realization that the only constant in the markets is change.

Methodology

See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Bonds Buffetted

2012-02-10T15:58:00.000-08:00

Warren Buffett on Thursday said that bonds and other assets tied to currencies -- which are basically anything that pays dividends that vary with general interest rates -- "are among the most dangerous of assets."

I couldn't agree more. In fact, I think Mr. B is a bit late to his conclusion.

On Dec. 11, 2010, I wrote in my essay The Myth of the Income Play, "[A]ny dividend can be wiped out completely by a month's worth of capital losses."

To summarize my argument briefly, dividend plays -- both long-term bonds and stocks -- tend to fluctuate every bit as much as non-dividend-paying stocks. However, to benefit from the dividend, the trader must hold the instrument through the ex-dividend date.

The presence of a dividend tends to encourage buy-and-hold trading so as to capture the payout, even when the chart screams "Get out now!"

If there is an active options market in the dividend-paying instrument, then it is possible to hedge the capital loss while holding for the dividend.

Absent a hedging method, income plays are a good way to lose money.

Buffett is based in Nebraska and is widely known as the "Oracle of Omaha".

I am based in Oregon. Now that Mr. B and I are on the same page, I hope that I can be known as the "Prophet of Portland".

Power to the PPL

2012-02-10T11:46:00.000-08:00

PPL Corp. (PPL) is holding company for electric and natural gas utilities in the mountain South and the United Kingdom. It is headquartered in Allentown, Pennsylvania, north of Philadelphia.

PPL's chart is of the variety known as a One-Bar Wonder. It has been in a major downtrend from $30.25 on Nov. 11, 2011, down to a low$27.29 on Feb. 7.

It announced earnings before the open today, beating analysts' estimates by 10.6%, and the price of the stock rose 2.7% from the prior day's close to $28.46.

There's nothing magic about a steep rise, per se. This rise, however, has set a higher high and therefore codes as the beginning of an uptrend within a larger downtrend.

And the downtrend is within an uptrend that began in 2010, which in turn is within a downtrend that began in 2008.

Wheels within wheels. That's the story of PPL, to an extreme not commonly seen on charts at this point in market history.

PPL had the most bullish chart of 16 selected at random from 675 large-capitalization stocks. I mentioned in a prior post today that the chart selection had been dismal among stocks considered bullish by analysts. Triple that opinion for the large-cap selection, where the pool of stocks has no directional bias.

PPL's return on equity is a respectable 14%, and the debt is high, at 1.72 times equity. Institutions own 71% of the shares, but they haven't bid the price up to extreme levels. A $1.54 in stock will buy an interest in a dollar's worth of sales.

The real draw of PPL is less in capital gains than in dividends. The stock pays quarterly for an annual yield of 4.9%. The next ex-dividend date is around March 7 or 8.

My strategy for high-dividend stocks is to hold shares for the long term, and cover downturns by buying put options rather than selling the shares. The analytical method for buying options as insurance is the same stock trend analysis that I would use in entering or exiting any bull position.

At this point for my account, I'm not using the methods described in my essay "Long-Term Trading" posted on Thursday.

PPL has a fine selection of options with ample open interest, so if I need to cover a downturn, the means are there.

The stock is quite liquid, at 4.3 million shares a day on average.

The big concern over entering now comes on the half-hour chart. The price has withdrawn from the high, set in the noon hour Eastern. Will the price correct in a wave of profit taking, or stand fast?

I don't expect to see much profit-taking. The breakout is within a fairly short time-span, and I'm guessing that most PPL players are in it for the dividend and the long haul.

Decision for my account: I intend to buy shares in PPL. However, I shall wait until near the end of today's session. If I like what I see, I'll execute the trade. Otherwise, I'll revisit the issue on Monday.

Update: I bought shares 40 minutes before the close after the price moved back up toward its peak.

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

COO: Through a glass darkly

2012-02-10T11:06:00.000-08:00

Cooper Companies Inc. (COO) makes contact lenses and also specialized lenses for glasses that correct medical conditions of the eye. Headquartered in Pleasanton, California -- across the Bay from San Francisco -- COO's main distribution centers are in New York, the U.K. and Belgium.

COO's chart is that of a company seeking a comeback in the affections of traders. It hasn't yet broken free of the correction that carried the price from a high of $84.20 in September 2011 down to $52.60 in mid-November 2011.

Since that low, the stock has risen with a single, 11-week pause up to $76.63 on Feb. 6. From that point it has stairstepped lower for four days in a series of lower highs and lower lows.

COO had the second-most bullish chart of 16 stocks added to the Zacks top buy list today. The top spot went to VOXX International Corp., which I analyzed on Jan. 19. I bought VOXX shares at the time, exited to avoid a correction, and today have re-entered on a breakout, buying shares again.

Frankly, most of the charts I saw today might as well have come from the bear pile. It was a sickly selection.

COO's chart has enough ambiguity that its future can be seen only through a glass darkly.

For COO to code as being in an uptrend, it must beak above $84.20, a level 13% above the present price of around $74.25. Even though COO still counts as being in a correction, there is money to be made as it moves up to challenge the prior high.

COO has a return on equity of 10%, a respectable level that counts as slow and steady rather than runaway growth. Its debt/equity ratio is 0.20, which is on the low side.

Institutions own nearly all the stock, and have bid the price up. It takes $2.65 in stock to gain an interest in a dollar in sales.

COO has average volume of 375,000 shares -- less than highly liquid -- but has a great selection of options, with 13 strike prices, many with three-figure open interest in the out months, such as May. However, open interest is non-existent to very low for March, the month I would use for a credit vertical spread.

Implied volatility is rising but remains at low levels compared to the most recent six months. My vehicle of choice in trading COO would be long call options for May expiration, which fits nicely with where the open interest lies.

COO reports earnings after the close on March 8. The semi-annual payout, which yields 0.08% a year, goes ex-dividend sometime in July.

Decision for my account: The price took a sharp drive in the past half hour (I'm writing about 2 p.m. Eastern). If the price moves above today's high of $74.76, I'll look to buy May calls.

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Long-term Trading

2012-02-09T13:18:00.000-08:00

After reading my essay "Chart Granularity", posted Wednesday, a reader asked: "Wouldn't the charts depend somewhat on the type of investment you're looking at making? Say, long term vs. short term?"

A fair point, and one that deserves consideration at length.

Most people want to hold positions for the long term.

Most people have wives, partners, significant others, children, grand-children, cousins, nieces and nephews, great-nieces and great-nephews, aging parents, best friends, buds, jobs, commutes, hobbies, places to go and people to see.

Most people have lives, and are unwilling to see those lives disrupted by the need to watch the markets with the hawk-like devotion required by short-term trading.

Most people simply don't have the time.

Momentum Trading

In my opinion, as a momentum trader, charts with fine granularity are the best way to decide whether to ENTER a position. The question of long-term positions vs. short-term positions is a matter of EXIT strategy.

Here is my reasoning:

A momentum trader's strategy relies upon finding a price trend and riding it until it falters. For example, if I'm looking for a bullish position, I want to find a stock whose price is rising now, so I can jump aboard the trend.

If the trend lasts for six months, then it will be a long-term position. If the trend falters next week, then it will be a short-term position.

What matters is what the stock does, not what my intentions were at the time of entry.

A long-term chart might show that the price has been on the rise, with corrections, since 2009. In my experience, that has no more to do with my trade than do the hieroglyphics of ancient Egypt. For a momentum trader, what counts is now.

In a market where events like the Flash Crash happen and computers dominate trading, long-ago support and resistance levels have melted away to irrelevance.

Of course, I have some control over the length of the position that allows me to stretch it out. It all depends upon how I define "falter".

An uptrend is a series of higher high prices and higher low prices. If I define "falter" to mean the first lower high and lower low after I buy, then I'll generally be getting out pretty quick.

If I define "falter" as a decline of 3% or more from the most recent highest high, then I'll be holding positions longer. The latter definition filters out small corrections in the trend.

You might call it a falter filter.

When I'm determined to enter a long-term position, I abandon momentum trading based on the price trend and go to other methods.

Moving Average Crosses

One method is to rely on two moving averages (MA) -- a shorter term MA and and a longer-term MA.

When the shorter-term MA crosses above the longer-term MA, I buy. When it crosses below, I sell.

A moving average is an average of closing prices for the past however-many trading days. Each day the oldest closing price is dropped, the newest one is added, and the average is recalculated.

One standard trading method is to use the 200-day MA for the longer term and the 50-day MA for the shorter term. This produces positions that can last for a year or more. It is eminently suited for the mutual funds required by so many 401(k) accounts offered by employers, since the mutual fund companies often limit the number of trades allowed each year.

It's also suitable for dividend-paying stocks, where holding for the long term avoids frittering away dividend income in trading fees.

Moving averages come in two flavors: Simple and exponential. A simple moving average is calculated by adding all the closing prices and then dividing them by however many there are. An exponential moving average gives greater weight to more recent closing prices.

As an example, I'll apply the 200-day/50-day exponential moving averages to SPY, an exchange-traded fund that tracks the S&P 500.

SPY hit a peak of $157.52 per share on Oct. 11, 2007. Let's assume that I, unwisely, bought that day. The worst-case scenario.

The 50-day crossed below the 200-day on Jan. 8, 2008. The close that day was $138.91, and I'll take that as my exit point, and my loss was $18.61 per share.

Ouch!, I say with some feeling. But, most long-term investors don't sell. They simply hold their position through thick and thin. As it turns out, things got pretty thin for SPY.

The decline reached its low of $67.10 on March 6, 2009. People who held their positions were down by $90.42, making that $18.61 loss for traders look pretty good.

The 50-day MA crossed back above the 200-day MA on Aug. 11, 2009. Long-term traders entered at the close, $99.73. At that point, the buy-and-hold crowd was down $57.79, and traders were down $18.61.

There was a sideways period in the summer of 2010 when the moving averages crossed several times. They would have been pretty much of a wash, no matter what strategy was used, so I'll ignore it.

The short-term MA next crossed below the long-term MA on Aug. 17, 2011. The close that day was $118.72. Traders exited at that point, taking an $18.99 profit. The buy-and-hold folk were down $38.80, and traders had a net profit of 38 cents per share.

By getting out, traders avoided riding the stock down to its most recent low of $107.43 on Oct. 4, 2011. They re-entered at the next MA upside cross on Jan. 6 of this year, at $127.71.

Since then, the price has risen to today's high of $135.59, giving traders a gain on this leg of $7.88.

If everyone in this thought experiment sold their positions today, the buy-and-hold crowd would have a loss of $21.93 per share, and traders would have a gain $8.26 per share.

Assume that you have $40,000 in your account -- not unreasonable for someone who has been diligent in putting money in their 401(k). That means that way back in 2007, you would have bought 250 shares of SPY, at the peak.

At 250 shares, the buy-and-hold strategy produced a $5,483 LOSS. The moving-average-cross trading strategy produced a $2,065 PROFIT.

That is how the methods compare during the worst recession since the 1930s and one of the worst market crashes ever.

Which strategy do you wish you had used?

Fixed-Term Positions

But if watching moving averages is just too time consuming, here is another strategy, somewhat akin to Warren Buffet's value trading.

Now, Warren Buffett never likes to sell his holdings. In 1996, he wrote that a shareholder should "...visualize yourself as a part owner of a business that you expect to stay with indefinitely, much as you might if you owned a farm or apartment house in partnership with members of your family."

Personally, I'm not comfortable with that approach. Indefinitely is a very long time, and the world moves on and changes more quickly now that it ever has before.

Here is a compromise between next week and forever.

Find a company whose business prospects you like. You might follow Warren Buffett, whose holdings are listed publicly on several websites. Or you might pick some stocks from Jim Cramer's charitable trust.

Or use some other method to find a stock that you like for the long term, preferably one with high volume so you have a narrow bid/ask spread and large capitalization. Large cap companies tend to be more stable. They don't go bankrupt as often as smaller companies.

Buy the shares a month before an earnings announcement. (It must be shares, not options, for this strategy to work well.)

Go to Google news and set up an alert for the stock's ticker symbol and the word "bankruptcy", and another alert with the symbol and the term "Chapter 11".

If you get an alert in your email and discover the company is on the verge of bankruptcy, then sell.

Otherwise, five months after buying -- one month after the next earnings announcement -- take a look at the stock price.

If it is above what you paid for the stock -- the base price -- then check out the reasons you liked the company before. If you still like it, then hang on to your shares for another quarter, setting a new base price at the current level.

If the price is below what you paid for the stock, then sell it and find another stock to trade.

And of course, there's no need to go as short as a quarter. Holding a stock for more than a year means you get a huge tax break, just like the 1%.

This strategy works best in a rising market. To determine if the market is rising, take a look at the SPY moving average cross chart, discussed above.

If the stock price is above the 200-day moving average, then odds are good that the market is rising. But don't rely entirely on the moving average. If your eye tells you that the price is falling toward the moving average, then don't take the trade.

As always, the first rule of trading is use common sense.

(The second rule of trading is that I must trade to make money. So I always try to make fast decisions about taking opportunities rather agonizing at great length over whether I should enter a trade or not.)

Closing Thought

There are as many ways of trading as there are traders. I find short-term trading works best for me. But I'm retired and I'm 66 years old. My family for the most part lives far away. I rely in part on the capital gains from trading to pay for necessities, as well as such fun stuff as my season ticket for the opera.

That means have I lots of time for studying the market and trading, and not as much long-term ahead of me as a 40- or 50-year-old does. And I'm motivated to harvest the money sooner rather than later, to pay my bills.

A younger person, with heavy family responsibilities and steady income from work, will need to look at different strategies. A younger trader's major cash drain may be decades in the future, when the kids to go college. And decades further down from that, to support retirement.

A younger trader can profitably adopt a longer-term strategy because the investment funds aren't being used to produce current income.

Whatever strategy a trader picks, it must, above all, fit the needs of the trader. Ultimately, life is way too much fun to waste on ill-fitting strategies.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

RSYS: A lotus in the mud

2012-02-09T11:42:00.000-08:00

RadiSys Corp. (RSYS) is one of those tech infrastructure company that makes electronic stuff that other companies use in their business. It had the most bullish chart of 20 stocks added to the Zacks top buy list today.

RadiSys, based in the western suburbs of Portland, Oregon, is like the lotus blossom -- a lovely flower that grows from the muck and mire. Its chart is a shambles from a distance that resolves into an orderly uptrend close up. Its financials have scratches and dents, yet RSYS manages to turn a profit quarter after quarter.

Sadly, when it comes to companies like RadiSys, I rarely understand what it is they really do. To quote from the Reuters profile, RSYS "is a provider of hardware and software platforms for Next Generation Internet Protocol (IP)-based wireless, wireline and video networks."

OK! Sounds so cool!! I think it has something to do with this. Or maybe this. Probably not this.

Oracle-of-Omaha Warren Buffet refuses to buy a stock in a company that he doesn't understand. I'm no Warren Buffet. As a momentum trader, my positions tend to be short term. I don't really need to know what a company does. I just need to know its price trend.

RSYS gapped up sharply on Feb. 1 after an earnings report that beat analysts' estimates. Rather than losing 6.8 cents a share, as the soothsayers had predicted, RSYS turned a profit of 5 cents a share.

So the price gapped, rested for five days, and then turned in a large intraday rise today.

In the longer term, the stock hit a pre-recession high of $17.48 in November 2007, then fell in two stages to a recession low of $4.01 a year later

The recession was unkind to tech companies, which have actually been living in an unkind world since the tech bubble of the 1990s burst. RSYS has been in a very long term decline since reaching its all-time peak of $65.75 in March 2000.

But such a long term decline has rises and falls of huge magnitude within it, and there is money to be made from the shorter-term trends.

From its recession low, the price attempted a recovery, but only managed a lower high of $11.00 in April 2010, before falling again to $4.01 last December.

But from that low, the price has risen steadily to today's high of $8.07 -- an impressive doubling in just a couple of months.

Financially, RSYS still looks like a start-up, with a 3% loss on equity. The debt/equity ratio, however, is 0.27 -- that's far from crippling and leaves the company with much flexibility in dealing with the slings and arrows of outrageous fortune.

Institutional ownership is fairly high, at 73%. And the price is still cheap. It takes only 62 cents worth of stock to control a dollar's worth of sales.

RSYS is liquid, but not highly so. The average volume is 201,000 shares a day, and the March options only have four strike prices, with open interesting standing at low to none.

Also, where the price is so low -- single digits -- I find options to be too pricey relative to returns for my taste. My vehicle of choice for RSYS is shares.

The next earnings announcement is scheduled for April 30.

Decision for my account: I bought shares today in RSYS.

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

BG: Big Ag

2012-02-09T10:49:00.000-08:00

Bunge Ltd. (BG), despite the name, makes its money from food crops, not from jumping off of bridges. BG is one of 16 large cap stocks that I screened today. It had the most bullish chart of the lot.

The White Plains, New York company is far from being the friendly family farmer. It has four business lines serving global markets.

1) It buys crops from farmers, processes them, and sells them to other companies that, often with further processing, bring them to the consumer.

2) It operates sugar cane mills in Brazil and sells the output as ethanol to fuel cars and electricity. (What a great anti-obesity and anti-tooth-decay program: Instead of eating sugar, burn it in place of coal, oil and natural gas.)

3) It produces edible oils -- that's the mayonnaise on your ham sandwich as well as the vegetable oil that fried your chips, and maybe the bread you spread the mayo on.

4) It sells fertilizer, to nourish new crops.

After hitting a peak of $135 in January 2008 before hard times hit, the company's stock dropped to its recession low of $27.60 in late October 2008. It then recovered to $72.98 in early August 2009, and from that, BG stalled, although with a slight upward tilt.

Since the recession low, the stock has set two higher lows, and two slightly higher highs. A rapid rise that began on Tuesday, Feb. 7, might be the beginning of the next leg up. But it might not. The chart remains ambiguous.

The ambiguity comes from where the price behavior today. An upward gap this morning followed by an intraday spring carried the price to a high of $63.65, just 15 cents below the last attempt, in late November 2011, to score a breakout.

But then the price pulled back, suggesting that the November breakout failure continues to act as a point of resistance. (Resistance often means that there is money that bought the stock at a peak before the price declines, and that money is eager to get out once the positions are back to break even.)

To sort out the various levels... At this point, I would code BG as in an uptrend both for the short term and long term, but a sideways trend for the mid-term.

The analyst consensus is that Bunge is a buy. However, the financials show it to be a rather staid company (as agribusiness companies tend to be). The return on equity is 9%, and the debt/equity ratio is 0.43. Best case, I would want to see a higher return and lower debt.

Institutions own 62% of the shares -- sort of low for a major player -- and the price is bargain basement. It takes only 16 cents worth of stock to control a dollar's worth of sales.

I don't generally do value analysis -- it requires more time digging into the financials of a company than I care to spend. But based on what I've seen so far, BG would count as a value investment rather than a growth play.

Today's price rise followed a pre-open earnings announcement that the company's net income fell 16% because of costs but the revenues were better than analysts had forecast. The 2011 annual earnings were down 60% from the prior year.

I think its notable that the price failed to break out on the news, but also that it rose sharply rather than following earnings into the cellar.

This tells me that the big money expects profits to turn around

BG, with average volume of 1.3 million shares, has a reasonable selection of options -- 10 strikes for March -- with open interest reaching into four figures for some options and narrow bid/ask spreads.

Implied volatility is at 25%, and it has dropped like a rock since hitting 32% yesterday. I would play BG as long options -- buying calls -- rather than selling vertical spreads for credit.

Next earnings will be announced sometime in May. The stock goes ex-dividend on Feb. 15 for a quarterly payout whose annual yield is 1.59%.

Decision for my account: I'm passing BG for now. I want to see a breakout past $63.80 before committing funds to this stock. Also, I've often seen exuberance over a happy detail in an otherwise marginal earnings announcement turn to second thoughts and a falling price. I'd like to give BG a chance to prove that impression wrong before opening a bull position.

Methodology

I screened the stocks using a tourney bracket with a one-month daily chart and a three-day half-hour chart, and then turned to a five-year weekly chart for the broad context in analyzing the bracket winner. See my essay "10,000 Charts" for a discussion of my screening methods.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Chart Granularity: An experiment

2012-02-08T15:47:00.000-08:00

For the past few months, as I screen stocks, I've been using charts with fairly broad granularity.

My main chart has been a 3- or 6-month daily, buttressed by a three-year weekly, and then for the final decision, a 10-day hourly.

All chart reading is comparison -- where the price is now compared to where it used to be. A six-month chart means used-to-be can be as early as August 2011, or in the case of the weekly chart, as early as February 2009.

But for a short-term trader, do price levels that long ago really matter much? Arguably, not.

An alternative would be to use charts with finer granularity -- for example, a one-month daily chart buttressed by a three-day half-hourly chart, with a five-year weekly chart for reference after the decision is made.

In other words, the decision wwould be based solely on the monthly and three-day charts. The weekly chart is something I would look at during the subsequent analysis.

That focuses my eye and mind much more on the now, which is the only place in time that I have any influence over. The past is beyond my reach, and the future, beyond my ken.

Readers who've checked out my essay "10,000 Charts" will know that I select stocks for trading the way the NCAA selects champion basketball teams.

I run my stocks through a tournament bracket, comparing two charts against each other to select the best for whatever direction I'm testing, and then pitting those winners, two-by-two, against each other until I have a champion.

Today's large-cap selection of stocks had these seeds: TXN vs. BEN, WTW/SHI, MNST/ABC, CS/IRM, DB/VLO, WPPGY/HIT, APH/CMG and EMR/PCAR.

When I ran the bracket before the close using charts with broad granularity, the Final Four were BEN, MNST, WPPGY and CMG. The semi-finalists were MNST and CMG, and CMG came out the champion.

After the close, I ran the charts again, this time using the finer granularity charts, with very different results.

The Final Four were SHI, CS, DB and CMG. The semi-finalists were SHI and DB, and SHI -- with volume today of a mere 14,840 shares -- was the champion.

The only stock in common between the two Final Fours is CMG.

Any conclusions from this exercise will depend upon what happens next. Where will CMG be a week from now compared to SHI?

The only conclusion that can be drawn now is that chart granularity matters. Whatever granularity a trader chooses, it imposes a bias on how he or she interprets the price action.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

ADS: Absurd ratios

2012-02-08T12:13:00.000-08:00

Alliance Data Systems Corp. (ADS) wants to connect with YOU!

The Dallas, Texas company runs private-label credit cards, loyalty programs, customer analytics, customer-loyalty consulting, email marketing (not the spam sort) -- you name it. If you're a customer (and who of us isn't), ADS wants to help the places where you shop keep you coming in the door.

The chart is of the Cape Canaveral variety -- it looks like the trail left by a rocket launching from the Kennedy Space Center.

ADS hit its recession low of $22.76 in March 2009, and then took off, running through two periods of turbulence on its way to today's higher high of $117.39. The most recent leg up began Nov. 28, 2011 at $94.60.

ADS had the most bullish chart of 23 stocks added today to the Zacks top-buy list. (See my essay "10,000 Charts" for details of my screening methods.)

The financials are -- well, a little strange. Return on equity is 317% (that's right, three figures), and the debt equity ratio is 30.93.

Institutional ownership is listed at 124%. Yet the price is low. It takes only $1.83 in stock to buy $1 in shares.

To put it bluntly, the financial ratios are absurd.

ADS has a good selection of options, with 15 puts and 15 calls for March expiration, many of them with three-figure open interest and a couple with four figures. The bid/ask spread is quite reasonable. And the stock is liquid, with average volume of 796,000 shares.

Implied volatility is way low, at 24%, just six points above that of the S&P 500. If I were playing ADS, I would buy calls.

Next earnings is scheduled for April 23.

Decision for my account: I've bought calls on ADS, despite the financial ratios. I'm a short- to mid-term trader, so the financials generally don't have time to matter on my positions. However, given the absurdity of the ratios, I'll be accompanying my position with a tight stop/loss.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

CMG: A high price for tasty goodness

2012-02-08T11:39:00.000-08:00

Chipotle Mexican Grill Inc. (CMG) -- well, everyone knows Chipotle, the mix-and-match design-it-yourself Mexican food place with high-quality ingredients.

CMG's stock has been rolling upward at an incredible pace since its recession low of $46.88 in early February 2009. The most recent leg up began at $321.47 on Dec. 20, 2011 and has continued up to a higher high of $375.25 set today.

Like most stocks these days, CMG's volume has declined this year compared to the end of 2011. But, it's a wonderful bullish chart that confidently shouts, "Buy me!"

The Denver, Colorado company, which does business nationally and, to a limited extend, abroad, had the most bullish chart among 16 large-cap stocks selected at random. (See my essay "10,000 Charts" for a description of my screening method.)

The company's financials buttress the bullish view. Return on equity is 23% and the company carries no long-term debt. That makes it a growth stock under my rules. Institutions own 99% of the stock.

The analyst consensus is that CMG is a buy.

Of course, there is a price to pay for tasty goodness. The price/sales ratio is sky high. It takes $5.16 in stock to gain control of a dollar in sales.

CMG's biggest drawback is the price. At nearly $380 a share, there is just not enough granularity there for proper position sizing.

The stock has a full selection of options with excellent bid-ask spreads, better than I would expect for a stock with average volume of only 604,000 shares. Implied volatility is way low, at 26%, and has been stalling sideways the past four days.

The volatility steers me toward an outright long position rather than a vertical spread. I would buy call options as my trading vehicle.

Next earnings are scheduled for April 20.

Decision for my account: A wonderful stock, but I don't like the high price, both in terms of sales (the same ratio as Google) and in absolute terms (high prices are awkward for position sizing). Also, the super-low implied volatility bothers me -- 26% is just 8 points above the S&P 500's volatility, supernaturally low for an individual stock. Those are pretty arcane reasons for rejecting a trade, but there you go. Sometimes it's the small things count.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

LINTA: Fingers in many pies

2012-02-07T11:33:00.000-08:00

Liberty Interactive Corp. (LINTA) is a holding company with fingers in a number of media pies. It has significant interest, not always controlling, in such companies as AOL, Backcountry.com, Bodybuilding.com, Expedia, QVC, HSN, Time Warner Cable and TripAdvisor.

The Englewood, Colorado company had the most bullish chart of 25 stocks added today to the Zacks top-buy list.

LINTA has been on a choppy upswing from $12.44 on Aug. 9, 2011. The most recent leg up began Jan. 25 at $16.44, and has carried the price up to a higher high today of $18.24.

The price is approaching a resistance level at $18.65 set on May 10, 2011, only 2.2% away. There's not much room to make money before that level is tested.

This is not a chart to love. None of the 25 Zacks picks that I screened today were. When you're looking at the pick of the litter, the litter's quality counts. The litter had no happily wagging tails.

(My essay "10,000 Charts" sets out my screening technique.)

One thing to really hate about LINTA is the volume on the daily chart, which has set a series of lower peaks since mid-December 2011. That shows waning interest.

One thing to really love is that it has set a higher high three days after a 2.9% opening gap last Friday, Feb. 3. That shows real momentum to the upside.

LINTA has return on equity of 10% -- not growth-stock territory but respectable -- and a debt/equity ratio of 0.93, much higher than I normally like. The institutions love LINTA -- they own 96% of the shares -- yet the price is near parity with sales. It takes only $1.14 in stock to control a dollar's worth of sales.

The options selection is fairly broad, with 17 puts and 17 calls for March. However, only two of those options have open interest, one with 21 contracts and another with 48. Even though the bid-ask spreads are decent, that's not enough options liquidity to meet my standards.

The shares, however, are liquid, with 3.8 million traded daily on average, and so shares would be my vehicle of choice.

Earnings will be announced Feb. 23 before the market opens.

Decision for my account: I'm passing on LINTA at this point. The potential profit between current levels and resistance is too small. A decisive break above $18.65 would prompt me to revisit the decision.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

MCO: Analyzing the analysts

2012-02-07T10:52:00.000-08:00

Moody's Corp. (MCO) is the good-guys debt rating firm. Unlike their counterparts at Standard and Poors last year, Moody's didn't downgrade U.S. sovereign debt as Republicans in Congress toyed with the idea of the government just not paying its bills.

Or maybe S&P was just more willing to face facts. Time will tell.

MCO's business is analysis -- how good is this company's debt? How about that government? Whose bonds are better? Greece's or Google's?

So it's a gobal business with consequences, which means the New York City company is often in the headlines, not always for the positive.

MCO had the most bullish chart of 16 selected at random from 675 large-cap stocks. My essay "10,000 Charts" describes my screening method.

MCO began its post-recession rise in earning in July 2010 at $19.46. From that point it has set a high of $41.93 in June 2011, retreated to a higher low of $26.79 in August 2011, and since then has risen back to $38.86.

The price is near a testing point. If it breaks above $41.93, then it remains quite clearly in an uptrend. If it reverses down from that point, then it is either moving into a downtrend or a triangle or sidewinder of some sort.

In any case, the $41.93 resistance point is 8% above current levels, so there is money to be made from the approach to that level.

One thing to like about MCO is the hourly chart, where volume has risen with the price for the past two days. The pattern has been broken with an intra-hour decline in the current hour, which began at 1 p.m. Eastern. Rising volume accompanying a rising price means there is buying momentum.

Although analysts in general are neutral on MCO, nearly all the stock is held by institutions, who have bid up the price to the point where it takes $3.77 in stock to control a dollar's worth of sales. The company has a fairly heavy load of long-term debt.

MCO is a liquid company, with average volume of 1.6 million shares and a wide selection of options with decent bid/ask spreads. However, open interest is on the slim side. Out of 44 possible March options, only four have open interest in the three figures.

Earnings will be reported before the open on Wednesday -- tomorrow. The stock goes ex-dividend on Feb. 15 for a quarterly payout yielding 1.65% a year.

Decision for my account: MCO is not a buy for me today under any circumstances, not with the announcement so close. The last three earnings reports have beat analysts' estimates. But when I buy for earnings, I like to open at least a couple of weeks and better yet, a month, in advance so I can participate in any anticipatory rise. I'll look at the earning announcement on Wednesday, and make a decision then.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

THO: On the move

2012-02-06T11:42:00.000-08:00

Thor Industries Inc. (THO) makes recreational vehicles and small to mid-sized buses. Its products are household names for the on-the-move crowd: Airstream, CrossRoads, Dutchmen, Champion, General Coach, ElDorado California.

The obvious observation is, this Jackson Center, Ohio, company is going places. (Insert groan.)

But let's look at the chart.

From an all-time high of $59.99 in 2007, THO fell to a recession low in March 2009 at $9.54, and then rose to $36.49 in March 2010. At that point, THO ran into trouble. It corrected in an extended zig-zag that resulted in a lower low, but not a lower high. In other words, the correction is flat on the top but rising on the bottom.

After hitting that higher low of $19.20 in August 2011, the stock again began to rise, hitting a leg-up high of $33.40 today.

The topside resistance level is $36.85.

It's a curious chart, one of 28 additions today to Zacks top-buy list. It had the most bullish chart of them all, which may say more about the Zacks selection than the merits of Thor. (My essay "10,000 Charts" sets out my screening technique.)

The chart tells me this:

There has been strong upside momentum since mid-December.
The most likely resistance point is $36.85. That's 10% away from today's high and makes for a nice profit.
Post-recession, the stock is in an uptrend.
For all time, the stock is in a downtrend.

So despite its strangeness, THO makes an attractive play, just based on the chart. I could see it as a bull play up to $36.85. If it breaks past resistance, I add to the position for even more profit. If it falls from resistance, then I set up a sideways play, such as an iron condor, to capture the fifth leg of a sidewinder.

THO's financials are also attractive. Return on equity is a healthy 13% -- not growth stock territory but it indicates an efficient management. And it has no long-term debt, which shows not only that the company has good management but also that it has enhanced ability to weather crises.

Institutions own 80% of the stock -- people who analyze for the big money think well of Thor. And yet, the stock is cheap. It takes only 63 cents of stock to control a dollar's worth of sales.

The stock is moderately liquid, with average volume of 435,000 shares. The options selection is a bit limited, with nine strikes available for March. Open interest near-the-money is in the three figures, but then drops off quickly.

Implied volatility stands at 47%. It rose from a low of 30% in late January, but has fallen from its end-of-January high of 49%. Given that rise, I would play this as a long position, with an opening debit.

THO announces earnings on March 5. It will next go ex-dividend on its quarterly payout, worth 1.82% annually, sometime in March.

Decision for my account: I've opened a bull call spread that expires in March, long the $30 call and short the $35 call.

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

IBB: Back to the Future III?

2012-02-06T10:57:00.000-08:00

In my random selection of large-cap stocks to compare, fate for the first time has given me an exchange-traded fund to analyze -- a challenge because the information available for funds differs from individual companies, and I find ETFs to be much more difficult to evaluate.

iShares Nasdaq Biotechnology (IBB) mimics 125 biotechnology companies traded on the Nasdaq, most of them with small capitalizations. It carries a ratings of two stars out of a possible four from Morningstar.

IBB had the most bullish chart among 16 selected at random from 675 large-cap stocks. (See my essay "10,000 Charts" for an explanation of my screening techniques, including the random component.)

The chart has been in blue-sky territory since early January. It has been on the rise since its 2008 recession low. The most recent leg up began Aug. 9, 2011 at $84.01 and it hit a fresh high today of $121.82.

So for momentum traders, who like nothing better than to leap aboard a fast-moving train, IBB is a dream play.

Biotech always has a futuristic tinge, in my mind. These companies generally are doing cutting edge stuff that will provide incredible benefits to people in decades to come, and also incredible profits for successful meds.

But like all cutting edge enterprises, the risks are high. Failure can be spectacular. IBB may be a speeding train, but what lies ahead?

The fund carries a 0.48% annual fee -- on the low side as such things go. Its top holding is Amgen Inc. (AMGN), accounting for 8.25% of the fund, followed by Alexion Pharmaceuticals Inc. (ALXN) for 6.59% and Gilead Sciences Inc. (GILD) for 6.16%. The full top holdings list is part of the iShares fund profile.

AMGN has a debt/equity ratio of 17%, ALXN of 16% and GILD of 44% -- all in growth-stock territory. Debt to equity is all over the place.

IBB is moderately liquid, with average volume of 906,000 shares. But it has a full selection of options with tight bid/ask spreads and acceptable open interest, although the open interest is a bit lower than I like.

Implied volatility is quite low, at 21%, and has been declining in its most recent leg down since last November. However, it has risen since bottoming at 16% on Jan. 12. So the question is, how low can it go. Don't know.

Decision for my account: It's a sweet but I'm passing it. I'm having a hard time constructing an options positions that works for me in light of the low implied volatility. The chart looks like a speeding train, but the implied volatility looks like the train is about to run off an incomplete bridge into a canyon (with a tip of the hat to "Back to the Future III"). Also, why play the fund when I can play some of its top holdings, with greater volatility?

Disclaimer

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.

No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.