When creating a list of stocks to go on the morning’s watch list and blog, there are discernible reasons as to why each stock is placed in this space. Oftentimes, people will ask how particular stocks, but will not be aware whatsoever of what was going on because they haven’t done very basic reading of the research I did to denote the stocks in this space in the first place. Thus when people want to act on a certain symbol, oftentimes, they are doing it without totally understand the trade. But I try even in shorthand due to the plethora of stocks out there to list the ‘why’ I have everything here from a very basic ‘closed near a high’ to a more specific reason (which tend to be my favorite plays). Such an example occurred last week. On Wednesday night, Polo Ralph Lauren (RL) issued a press release concerning a share offering. The relevant portion is as such: Polo Ralph Lauren Corporation (NYSE: RL) (the "Company") today announced that an underwritten secondary public offering of 9.0 million shares of Class A common stock owned by its principal stockholder, Mr. Ralph Lauren, was priced at a public offering price of $81 per share. J.P. Morgan, Goldman, Sachs & Co., Deutsche Bank Securities and UBS Investment Bank, the underwriters of the offering, have a 30-day option to purchase up to an additional 1.35 million shares of Class A common stock from Mr. Lauren. The Company did not sell any shares in the offering and will not receive any proceeds from the offering. The Company has also agreed to purchase an additional 1.0 million shares of Class A common stock from Mr. Lauren at the per share price of the
public offering. All of the Class A common stock to be sold by Mr. Lauren will consist of shares received upon the conversion of an equal number of shares of Class B common stock.” On Thursday, I noted in the blog that Ralph Lauren was a seller of his own stock. If you read the press release portion very carefully, you’ll see the company received no benefit whatsoever from this offering. Instead, it was Ralph Lauren himself who sold $729 million of stock and perhaps more should the underwriters choose. Lauren could have any number of reasons for selling ranging from he just wants to cash out some in guaranteeing liquidity for life to a more sinister desire to exit…I mean, who knows the business of Lauren’s company better than Ralph Lauren?! When Blackstone Group (BX) came public, the day of its IPO was the day that BX traded at its highest level as an example that this type of action can and does occur. Thus, it’d seem 81 had to be some sort of immediate-term cap ceiling on the stock logically because if the founder of the company was selling stock there, why should anyone buy it above 81? And this is where the day trade comes in. The buy is not at 80.80 when the range is 80.95 to 80.65 .The trade is not at 81 even if it is a high of day. The distinct trade here just by taking a little time to skim the press release is to buy the stock above 81. Indeed, on Friday once the stock popped above 81, it rallied to 81.22 within two minutes. That’s it. That’s the trade. Whether you get it or miss it (like I did as I just wasn’t fast enough), that’s the only thing to do. So, as you do your research for your trading no matter your style of trading, be aware of the stories behind the stocks you are trading because a thorough comprehension will not only earn you a living, it can save you from losing a lot of money.
Markets overnight rose sharply throughout the world with Tokyo up 2.4%, Hong Kong 3.1%, China about 3% and 1.1% to 1.4% throughout the major European bourses. Gold is up slightly, oil is up 1% plus, and the dollar is stable. The main trigger (offsetting more negative news out of BP) is that China is seeking to widen the trading band for its yuan. It is a token move, but one in which the markets are viewing as China trying to signal that it is attempting to conform to the worldwide economic schematic by appearing to be more flexible in its actions. Futures are sharply ahead albeit off of their highs of the morning as of this writing. Look for some give back of this strength after the opening rally. Focus on the drillers, relative weakness plays, and the small cap stocks with drug news out there.
Reiterating-
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
AMLN- closed near a high after Roche’s competing prospective drug was delayed along with a JP Morgan AMLN upgrade
RIG- closed near a high on increasing belief that it will be spared significant legal expense from the Gulf oil mess
DO- closed near a high
VECO- closed near a high after an initiation of a buy by Noble Financial
WNS- closed near a high after positive form 20-F data
OAS- closed near a high
MWE- featured on “Mad Money” on Friday night
ZIOP- positive guidance of phase III Palifosfamide data
DYAX- announced partnership with Sigma-Tau to develop and commercialize DX-88
EFJI- accepted $1.50/ share cash takeover bid; possible pre-market play
CYPB- in-licensed BioLineRx’s CYP-1020 schizophrenia product
AIPC- agreed to be acquired for $53 share cash takeover bid; possible pre-market play
END- reports positive results from a U.S. drilling initiative
Bad-The following stocks have bad news and/or a weak technical pattern
CWLZ- reversed in closing near day’s low
CVS, WAG- closed near a low in an island reversal after resolving their pharmacy-benefit management dispute
LINTA- closed near a low
AFFY- slightly disappointing phase III Hernatide data
VRX- merging with BVF; VRX shareholders will receive 1.7809 BVF shares for their shares plus $16.77/ dividend. Values VRX at $42.77 compared to $45.87 Friday close, but BVF shareholders should get slight premium on deal
CPKI- poor earnings guidance
Earnings:
MON JUN 21 BEFORE
None today
MON JUN 21 AFTER
SONC
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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