I think this stock is just waiting for it’s options to expire to make a nice move up this month.
They had a $1.50 jump since a well-deserved UBS upgrade on the 12th and I think the stock is just resting on its 50 dma of $54.50 before legging up after options expire. It should pull back to the $53-54 range today but is likely to finish tomorrow very close to $55.
What I really like about the stock is the low cost of the Jan $50 call @ $5 (a .60 premium) coupled with the fairly large amount of shorts (12M) who will be looking to unwind their position as soon as this stock tops $55. I am going to bid $4.25 for the call and hope to pick it up cheap but, if the stock turns up I will pay up to a .75 premium.
The company is giving fairly conservative guidance for the quarter of 5% growth which will still take it to earnings that will beat ’05 by 10%, even after a very disappointing 2nd quarter. The stock is just .80 over last year’s high and 13% under this year’s high.
On this trade I will be looking to exit at +.75 with .25 trailing stops behind that level.
Today’s CPI numbers looked good but the core was actually not so hot so it will be interesting to see how the markets take this news, which may increase the possibility of another Fed hike next year.
I’m looking for a weak open that gains strength but I may just be hoping…
