Here’s a post I just wrote for SMB Capital, the firm I’ve been working at for the last year and a half:

We talk about the easy money constantly in this blog.  Yesterday offered some great easy money opportunities that you have to be able to capitalize on.

The first situation is the 47.50 level in RIMM.  Bella discussed this level the other day in his blog post, and how a great amount of volume went off at that level.  Yesterday RIMM was very weak on the open, selling off from (surprise surprise) the 50 level that was also discussed in that post.  Putting in a bid in front of the 47.50 level and risking ten cents would have resulted in an excellent risk to reward trade.

The second was FCX at the 30.50 level.  A lot of volume went off at the level yesterday in the morning, and then again in the afternoon.  Once it got above the 50 cent level, it developed a 15 to 20 cent range that could have been taken advantage by buying in the low 50’s and selling in the high 60’s, ultimately breaking out above 70 climbing to the high 80’s.

The reason I bring these two examples up is because I remember when I first started trading.  Whenever support broke, I would be looking for weakness, and not necessarily play the long side.  And there were a good amount of times I would get stuck hitting the bottom before a strong up move would begin.  The reason I bring this up is because both those stocks dropped their support for about 2 seconds before having their up moves.  I did not short these stocks when support dropped.  I hit out of my long and re-evaluated.  The only way I would get short would be if there was a big seller at or below the support level.  When the support re-bid, I got long again.

And these weren’t the only stocks I saw this pattern in.  I saw this same pattern in HIG, SPY as well as a few others this week as well.  This is something that you must be able to notice and take advantage of in order to make some easier money. Almost all of the money I made yesterday was in these two setups.  I traded other things as well, but these were by far my most lucrative and stress-free trades.

Enjoy your long weekend.

Intraday 2-13-09

2-13-09 Intraday Chart

Looks like I’m a day late on posting this.  I started working on it last night, as you can see from the chart.  A few things that I really like from glancing at the chart:

  • The double bottom formed in late October and November.
  • The cup and handle pattern formed over the last few months.
  • The MACD divergence (You have to look at a longer term chart to get a better picture).
  • The consolidation between the $5 and $7 range.

I started my long position in late October and then added to it in November, and then during the consolidation above 6.

I think fundamentally, the company is strong.  Bill Cara posted an analysis his firm did on the company about a month ago.  It shows the strong fundamentals of the company, as well as the strong fundamentals behind precious metals.

I expected the catalyst for the stock to trade higher to be whether gold began to trade over $930 for over an hour or so, or if it had a strong move through the $930 level.  This is when I wanted to add to my position.  I missed it this morning, and thus wasn’t able to add to my position.  Earnings are due out next week I believe, so that could be a catalyst as well, either upside or downside.

Regardless, I think this is a stock to keep your eye on.  If precious metals begin their bull market the way I believe they will, this stock could trade significantly higher in the coming months.

One note I must make about what I don’t like about the stock:  they recently did an offering at around US$6.60 per share, which provided for recent resistance.  I would like to see the stock close above $7 on high volume, before I expect it to run. 

 

1 year chart

4 month chart

So somehow in December, my site got all messed up, I lost all my data, and haven’t been able to update.  I finally got around to fixing it.  I’m trying to recover my older posts, and will start posting again soon.

As stated yesterday, True Religion will be presenting at the Brean Murray conference. One thing I forgot to mention yesterday, was that short interest actually INCREASED from December 15th to January 15th. There are now 4.9 million shares short. This is a little uner 20% of all the shares outstanding. If you watch the price action, you’ll see investors are now holding onto their shares. Its going to be harder to scare people out of the stock going forward. Add to that the fact that this is becoming an IBD darling, and we have alot of potential here.

My biggest concern for today will be the Fed meeting. It’s expected that rates will be raised, but the question will be with regards to the future. Will the rates continue to be raised? Bernake will now have control. So many questions. The market could take a dive in the afternoon. I’m sure there will be pretty light action in the Street until the anouncement is made.

I added to my gold position just right now to take advantage of the upward movement I think gold will see once the rate hike is announced.

Tomorrow they will be participating in the Brean Murray conference as mentioned in their press release last week.  I don’t really expect any significant news out of the presentation.  Maybe we can get a better idea of how the company is doing this quarter, what the current backlog is, and an approximate number on how much the Manhattan Beach store contributed to the bottom line.  I don’t think we’ll hear adjusted guidance.  Seems like the company wants to wait until the conference call to blow away the $.23 per share.  I think if they bring in anything less that $.30 there will be a sell off.

The fundamentals have not changed, so my outlook has not changed.  I would be buying on the dips right now.  I wrote a couple April 22.5 puts for $5.20 a share when the stock was at around $20.  I am looking into writing more puts if there is a pullback.

 

I bought my first real estate position this week. I’m partnering with two guys who have success buying distressed, pre-foreclosure properties mainly in Philadelphia. They buy the properties pretty cheap, rehab them, and then either keep it for cash flow or flip the property. After everything is said and done, they pay approximately 60 to 70 cents on the dollar for the property.

The deal is structured so that I put up all the money and they do all the work. After my capital investment is recovered, we split the profits 50-50. I think this is fair, since I don’t want to take an active role in small projects. My biggest concern is with regards to the mortgage liability, which will be in my name. Before entering into this agreement with them, I had seen how others had fared previously with them, and I like what I heard.

On this project in particular, we plan on holding the property for rental income. I’m expecting a return of a little under 30% in the first 18 months, and then a little over 30% over the next 12 months. The way it’s going to work is that we are going to close on the property (already done), perform the rehab work (beginning on Monday), rent it out (hopefully within the next 4-6 months), and re-finance. At this point, depending on the real estate market and my experience with this venture in particular, I will decide what to do with the money.

I am looking very forward to developing a strong working relationship with people knowledgeable in the real estate industry, particularly the distressed seller market. I feel that when the market collapses these people will benefit most from distressed sellers trying to get rid of their houses quickly because they realized they can no longer make the payments on their houses. I want to be in a position where I can take advantage of that.

The stock opened at $45 trading under the symbol CMG, which I personally feel is way overvalued. I expect the underwriters to keep the stock above $40 for at least a week. Seems like they’re the ones providing the support in the open market right now.

I will wait for it to come down to the mid to low 30’s before I think of picking some up. Hopefully I’ll have that chance.

Chipotle is set to go public today. I anticipate buying some. I don’t know exactly what strategy I want to use, but I like the company, and I love the burritos. I may buy some options if they are available and play the company that way. I may also buy a small position at the open and try to day trade it, but I’m undecided. Its a high profile IPO, so I imagine everyone else is thinking the same thing. We shall see later today.

In a previous post I had mentioned FHHI and how I took advantage of the reverse merger arbitrage opportunity that existed. After completing the arbitrage transaction, I studied the company further. Fashion House is in the shoe making business. What I like about the company alot, is they’re partnered with already established brands: Oscar de La Renta, Richard Tyler, and Bill Blass to be exact.

I had met with the CEO a couple of months ago, and I was thoroughly impressed. He wants to grow the company, and I think he will be able to do so effectively. Using multiple brands and lines, he will be able to penetrate all price points. In the Fall, the company introduced 1 Richard Tyler line as well as 1 Oscar de La Renta line. In just a couple of weeks, February 10th, the company will be introduced 1 more Richard Tyler line, 1 more Oscar de La Renta line, and its first Bill Blass line.

The most exciting thing about this company, is that although it is relatively young, there is no brand name that needs to be built. The brand names have already been established not only with vendors, but with the public as well. This will make it easier for the company to increase its door count much faster, as relationships have already been established with each company’s clothing lines already.

With approximately 18 million shares outstanding at the moment, the company will grow into its valuation fairly quickly, and could see anywhere from $3 to $5 a share within the next 18 to 24 months. When speaking with the CEO, he had told me that ultimately he would like to pursue a listing on a major exchange, and that he already has small, high quality companies on his radar screen that he would consider as acquisition targets in the future.

I am very bullish on the stock. In the past 2 days it has jumped approximately 60%. At this point I would probably wait for a small pullback, although its not guaranteed, but I am still considering buying at these prices. I will be attending the company’s exhibit in Las Vegas for the unveiling of its new product lines and will have an opportunity to meet with the CEO at that point. If anybody has any questions they would like me to ask him, please let me know.

I recently finished reading Freakonomics, and I must admit I was slightly disappointed. From reading the blurb, I thought it was going to be pretty interesting, helping me to realize things I would have never thought before.

The book provided me with some nice little anecdotes, but to be perfectly honest, I wasn’t impressed. Some of the conclusions established were rather easy, although reading the stories behind them is what made it entertaining. The book has no use with regards to increasing knowledge in economics, but like I said, could provide for some interesting stories to tell people at parties. My personal favorite topic discussed was the relationship between abortion and crime.

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