Daily Stock Market Equity and Options Trading Commentary

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Monday, August 3, 2009

The Weekly Dose: Bullish Breakout Stocks on Big Volume

I know I'm a day late as I usually post this on my blog Sunday night, but it's better late than never- right? In this post I have identified an updated list of 26 stocks which have broken out on big (very unusual) volume. As always, I believe the stocks listed in this post are worthy of adding to the stock watch list. As stated at the bottom of this post, I have chosen two stocks from the list which I may be speculating with in the weeks to come. Last week I had a stock LaserCard (NASDAQ:LCRD) which I speculated with Monday the day after posting it, and the day they reported earnings (after the bell). It is a week later, and up over 50%. Here is the outcome to that trade.

As stated in previous blog posts, I'm a firm believer of stocks which have had significant moves higher on big volume. Some of these stocks will sell off, and some will continue to move higher, it is important to use caution when purchasing and use discipline when selling.

All of these stocks have had nice moves higher on huge volume (% volume increase compare to 50 day average).

As of August 3 2009, the stocks which are on my watch list are listed in the table below.

Company Ticker % Change Volume %
Oncothyreon Inc. NASDAQ:ONTY 41.69 1184.00%
Advanced Battery Technologies, Inc. NASDAQ:ABAT 8.64 48.32%
Commercial Vehicle Group, Inc. NASDAQ:CVGI 74.13 596.83%
Dana Holding Corporation NYSE:DAN 23.08 164.49%
Embraer - Empr Bras Aeronautica (ADR) NYSE:ERJ 12.26 349.49%
Carpenter Technology Corporation NYSE:CRS 3.37 120.33%
LJ International, Inc. NASDAQ:JADE 18.26 258.57%
KeyCorp NYSE:KEY 11.25 50.62%
OMNOVA Solutions Inc. NYSE:OMN 8.02 34.37%
Valassis Communications, Inc. NYSE:VCI 13.26 238.08%
Affymetrix, Inc. NASDAQ:AFFX 7.47 55.76%
Century Aluminum Company NASDAQ:CENX 15.27 83.59%
Denny's Corporation NASDAQ:DENN 8.23 115.04%
FTI Consulting, Inc. NYSE:FCN 3.12 391.39%
Nautilus, Inc. NYSE:NLS 35.68 540.87%
AGCO Corporation NYSE:AGCO 1.38 18.95%
Conexant Systems, Inc. NASDAQ:CNXT 28.67 419.78%
Converted Organics Inc. NASDAQ:COIN 49.49 543.29%
Orbitz Worldwide, Inc. NYSE:OWW 20.38 428.42%
Patriot Capital Funding, Inc. NASDAQ:PCAP 97.02 783.09%
Sify Technologies Limited NASDAQ:SIFY 23.2 1113.62%
Unisys Corporation NYSE:UIS 11.73 266.41%
Keryx Biopharmaceuticals NASDAQ:KERX 40 622.50%
KKR Financial Holdings LLC NYSE:KFN 32.35 402.25%
Transcept Pharmaceuticals, Inc. NASDAQ:TSPT 41.72 2880.94%
Telik, Inc. NASDAQ:TELK 20.69 206.71%

As you may know, some of these stocks could give back all of their gains just as quickly, so instead of purchasing the stock, sometimes I purchase at or near the money call options on the stock. Purchasing call options is a cheaper way of opening a position on a stock, but if the stock sells off, you'll lose 100% of the premium you paid for the option and will not hold the stock, however if the stock continues to rally, you're % gain will most likely be much greater than if you purchased shares on the stock. To learn more about options in general check out my blog or stock option trading E-Books here.

Not all of these stocks have options traded on them, but the ones which do could pay off in big ways. I used this strategy when purchasing STEC Inc (STEC), and LaserCard (LCRD) and it paid off as both continued to rally after the calls were purchase (see more here).

The two stocks I am choosing to keep a close eye on this week for speculation are:

Advanced Battery Techs (ABAT), and Valassis Communications, Inc. (VCI).

The Trade:

ABAT Option Trade:
Purchase the September 5 call options, as they are going for roughly $30 per contract. The price of this call contract was up 250% today on an 8.64% move up in the stock. I would look at getting in for $15 to $20 per contract on slight weakness in the underlying stock. Obviously if the stock sells off greatly I would scrap this idea, but if it pulls back slightly to the $4.15-$4.30 range I think contracts could be purchased for this price. They are scheduled to report earnings on August 12, so if I get in and have a profit I will likely choose to lighten up before earnings. ABAT hit a new 52 week high today, on increased volume of about 50% so a continuous run isn't out of the question.

VCI Option Trade: The strategy I am looking at for this stock is to purchase it and write an in the money call for the August 12.50. It is currently in the money by 40 cents. If the stock can hold above $12.50 a share (the stock is assigned at expiration) by August 21, 2009, the return on this position would be 5.8%. The downside protection on this stock is 8.9%, so if the stock does not expire 8.9% lower than the current share price, this position will also be profitable. These guys are coming off a great earnings report. They have rallied over 55% since their earnings release, so I will certainly be looking to get in on weakness.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

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