To OTC Journal Members:
 

Profit Alert- Sell Lending Tree (NASDAQ: TREE)

The usual Monday morning yawns were replaced with a surge of adrenaline at my house today when I turned on the computer and checked the morning stock quotes.

Lending Tree - the subject of two recent editions, was up over 40% and trading at $21 per share. In the April 5th edition I published a Trading Alert on the stock with a thirty day price target of $15 to $16. As luck would have it, I didn't aim high enough. Since the stock opened at $21 this morning, if you were still holding TREE you made an outstanding and exciting profit.

This morning, just prior to the open, Lending Tree announced USA Interactive (NASDAQ: USAI) had tendered an offer to buy out the company in a share exchange. Holders of Lending Tree will receive .6199 shares of Barry Diller's USA Interactive for each share of Lending Tree owned. USA Interactive has been on a buying binge recently. In the last 12 months USA has acquired Ticketmaster, Expedia.com, Hotels.com, Lending Tree, and several other smaller dot-coms. 

Lending Tree opened for trading today at $21 per share, up over 40% from Friday's closing price of $14.69. Until the merger closes, Lending Tree will trade up and down in concert with USAI. Therefore, in order to decide if Lending Tree is a hold or a sell, you have to look at a chart of USAI and ask yourself if you would buy it today. That's why I have a chart of USAI in today's edition. Would you buy this stock today? My answer is no- and not because USAI isn't a good stock to own for the long term. It's simply because the stock is extended on the chart, and the risk/reward entry level is not favorable. Therefore, I recommend selling TREE right away.

Here's the net result of this idea:

• A purchase of the common stock at $12 one month ago yielded 9 points- 75% return on your invested capital.
• A purchase of the common stock on margin at $12 one month ago- 150% return on your invested capital.
• A purchase of the May 10 Call options we suggested at $2.85 in our April 5th edition- Currently trading at $10.20- 257% return on invested capital.
• A purchase of the May 12.50 Call options we suggested at $1.20 in our April 5th edition- Currently trading at $8- 566% return on invested capital.

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