One Friday morning quite some time ago, there was an extensive story in the “New York Times” which centered around the rumor that Altria Group (MO) is going to make a takeover offer for UST (UST). UST is the maker of such products as Skoal so it’d seem to be a natural fit for a cigarette entity. Sure enough, UST reacted violently, opening up 13 points around 67. The stock held much of the day. Then, mid-day, MO came out and called the report that it was to buy out UST “pure speculation.” The stock immediately broke slightly, rallied, broke more, and then rallied all the way back and more. What can we learn from this? A) Headlines can sometimes be misleading or factually incorrect. B) If the headlines are correct, the stock may not do what you expect it to do so get out immediately if wrong. C)The best trade is the one most people do not do- namely, take the opposite side. In this case, when UST did a A-B-A2, if you’d have bought the stock where it first was when the story broke, you’d have been very profitable. There are two morals here: first, always, be careful. Always. This coming from the author of this piece who lost money in the situation on the first move down. Second, there are always trades to be made; if something does not act as expected, the force the other way is usually quite good.
Markets overseas were gently higher overnight with Tokyo up ½%. Markets in Europe have followed suit, up about 1/3% on average. The story of the morning has been a surge in the metals with platinum up 2% and a beating of the dollar with it down near a full yen and weaker by 1 ¼ euro…just gigantic moves. Futures are modestly higher. Look for a very slow day and a positive one at that, again, pending movement in the dollar. Trading will be very slow with activity done for the most part in the morning and only in selected microcaps.
Watch list:
11252009Eriklist.zip
Reiterating-Please understand that if the ideas do not get to the hoped for set-ups cited below, more often than not, one should not blindly trade the symbol next to said idea. If the whole story is not there -If something is good, assume either a short thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified.If something is bad, assume either a buy thru unchanged or an A-B-A2 (preferably to the downside in a downside market and the upside in an upside market) based on direction of the market unless specified- Good- The following stocks have good news and/or a strong technical pattern
JCG- great earnings
TIVO- signed deal with VM, but had lukewarm earnings
BCSI- decent earnings
NVDA- U.S. Patent office rejected all 17 claims in RMBS’s patent assertions
QADI- great earnings
AONE- closed near a high after receiving a small contract from the federal government
SQNM- closed near a high on various rumors from a takeover to positive drug buzz
PVH, FLR- featured on “Mad Money” last night
HPJ- closed near a high
TBH- traded in a crazy fashion after restructuring itself into a holding company; ratio should be .1 TSU plus .1 VIVO which equals 4.72 based on closing price yesterday yet it traded to 14
LDL- closed near a high
SIGA- closed near a high
GPRE- closed near a high after posting good earnings
TIF- great earnings
INCY- entered into collaboration and license agreement with NVS for two of its investigational hematology-oncology therapies
Bad-The following stocks have bad news and/or a weak technical patter
CWTR- bad earnings
RMBS- down on the NVDA win re patent story listed above
DRAM- terrible earnings
EMC- reduced earnings guidance slightly (although kept operating earnings guidance intact)
HAL- sees major reduction in Pemex facility for 4th quarter which will hurt 4th quarter earnings
HI- closed near a low after posting poor earnings
SAY- probed anew by India’s federal probe agency over accounting fraud
DE- poor earnings
CONN- poor earnings
Earnings:
WED NOV 25 BEFORE
DE TIF
WED NOV 25 AFTER
None
Good luck today.
Epiphany Trading, LLC
www.epiphanytrading.com
Erik R. Kolodny- Chief Markets Strategist
Brendan P. Byrne- President
Joseph R. McCandless- Managing Partner
D. Timothy Seaquist- Managing Partner
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