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It was only a matter of time before the casino stocks got a lift. The sector has taken a beating as consumers continue to cut back on everything as the ongoing housing downturn, diminishing credit, rising food costs and recession worries continue. Gambling was taking a back seat to all of the aforementioned issues but not today.
Last Thursday I mentioned a slew of casino stocks that looked good for a trade as many of the stocks had fallen 50%-75% off their 52-week highs. The short sellers are in the market today buying back stock as many of them are getting “squeezed”.
A short squeeze happens when a stock starts to rise rapidly and the short sellers want to get out. Supply and demand comes into play when short sellers start to cover and for many of these casino stocks that is what appears to be happening. There was some good news that came out of the sector today which was enough for short sellers to start buying back the stock. The price of a stock can be pushed even higher if there aren’t enough shares to go around.
Here is the list from last Thursday with a few LEAP options I had mentioned. I have also listed some November options that did well today.
Las Vegas Sands (LVS, $8.91, up $3.96)
November 10 calls (LJJKB, $1.70, up $1.25, or 277%)
January 2010 10 calls (LNUAB, $4.60, up $2.39, or 108%) — these calls do not expire until January 15, 2010.
MGM Mirage (MGM, $13.75, up $3.42)
November 10 calls (MGMKB, $4.70. up $2.75, or 141%)
January 2010 10 calls (YDMAX, $8.50, up $4.40)
Wynn Resorts (WYNN, $41.05, up $8.17)
November 40 calls (UWYKH, $8.00, up $5.65, or 240%)
January 2010 40 calls (YPWAH, $15.20, up $5.00, or 49%)
Boyd Gaming (BYD, $5.63, up $1.25)
November 5 calls (BYDKA, $1.05, up $0.80, or 320%)
January 5 calls (WWAAA, $2.50, up $0.90, or 56%)
Pinnacle Entertainment (PNK, $4.42, up $1.67)
The trading volume for the options on Pinnacle are thinly traded, that is why I didn’t list them. The November calls for these stocks could trade higher by the time they expire and are worth a small gamble. However, I believe the January 2010 call options for these stocks are compelling.
Rick Rouse
Rick@OptionsMentoring.com
SkullCandy (SKUL) Shorts Get Squeezed
Friday, November 4th, 2011
1:20pm (EST)
Mama’s got a squeezebox she wears on her chest
And when daddy comes home he never gets no rest
‘cause she’s playing all night and the music’s all right
Mama’s got a squeezebox, daddy never sleeps at night
It’s Friday and you know how we like to play the office tunes as we wind down the week. Today’s classic come from The Who and just like the Doors song from a few weeks ago, Break on Through to the Other Side, we had to play this one today.
We have been following SkullCandy (SKUL, $17.88, up $2.59) all week on our Watch List and we told our subscribers a short-squeeze could be in the works for those betting against this recent IPO. The short interest in the stock is currently at 4.6 million shares which is 12% of the float. This means based on the average trading volume, it would take the short sellers 14 days to cover.
A short-squeeze can happen when the price of stock with a high short interest begins to rebound and gains momentum. A better-than-expected earnings report could cause the short sellers to panic which also adds to demand as they buy shares to cover their short positions. This can cause the stock price to further escalate if shares are hard to find.
There were a lot of traders betting against SkullCandy because they believed the company would miss Wall Street’s estimates or shares were over-priced to begin with. Well, after the company reported a profit, we are seeing a squeeze play out today.
The stock is up 18% but the December 15 calls (SKUL111217C00015000, $3.20, up $2.00) are up 167%. Although we didn’t take the trade that was on our Watch List, we had some happy campers who did.
The company reported a profit of $959,000, or 4 cents a share versus a loss of $1.2 million, or 9 cents a share, in the year earlier period. The best part about the SkullCandy story is that they are just getting started. Once they start hitting their stride internationally, shares could double from current prices.
We have had another good week and please keep your comments, questions, AND the trading stories coming! We love hearing how much our subscribers are making. We are currently riding a 27 trade win streak and we will look to keep it going next week. October was probably our best month EVER and November has gotten off to a sweet start as we have a number of trades approaching triple-digit returns.
As far as the market, the week the bears have a comfortable lead and will probably win the week. The Dow came is currently down 113 points to 11,935 while the S&P is lower by 12 points to 1,249. The Nasdaq is showing a loss of 15 points and is at 2,683.
We plan to continue to play the upside because we think 11,800 and 1,225 will hold on the Dow and S&P, respectively. We have been rather aggressive in this market and it has paid off. You can request our detailed 2011 Track Record to see our closed trade results to get an idea on how hot we are. We will be back Sunday night with our Weekly Wrap and if you are still on the fence about getting back into this market, don’t be. You need to get in, now.
We will also be doing a video this weekend on some possible earnings trades for next week. Some will be listed on our Watch List but some of them won’t be. We will be showing our trading course members how to find candidates for next week and we will be walking everyone through, step-by-step, to see if there is a possible trade in some of the names we are looking at, including chart work.
Remember, you can become a course member at no charge by signing up for a 1-year membership to our Daily publication. The trading course comes with 2 manuals, How to Trade Options on Momentum Stocks and our Momentum Stocks Watch List which list hundreds of different stocks and the sectors they trade in. The course runs for $895 and is included at no charge when you upgrade and the manuals are shipped right to your doorstep. You will also have access to our bi-monthly videos, including the one for Sunday.
If you really want to see how we set up our trades, then this is the video for you. Until then, have a great weekend!
Tags: short squeeze, short-interest, SKUL, SKUL earnings
Posted in Hot Stocks, Market Analysis, Market Commentary | Comments Off