CREE Closed Out

As an FYI for everyone, I closed out my position in CREE today at $22.45 for a net loss of $8,000 on the 2,000 shares I sold.

The stock traded up nicely off this week’s earnings release, which for the first time in several quarters was actually on the number Wall Street predicted.

Most companies are making their numbers these days as the analysts had them ratcheted way down.

Their forecast for the second half of the year was not too impressive in my view, and they have missed Wall Street estimates the last two quarters.

When LED bulbs really breakthrough and become disruptive technology, it will be time to revisit this stock. I’m keeping the 1,000 shares I have in my IRA just in case.

I’m sure we’ll revisit this stock again. For the time being, I prefer to be out.

Larry’s Look at Today’s Market: 6/17- CREE Stars Today: 3:25 Pacific

There were two highlights from today’s trading action in the markets- first- the market tried to roll over and sell off after I suggested getting a little shorter on the last three day run up.

Secondly, for some inexplicable reason, CREE made a half way decent move today on moderately improving volume.

As you can see from today’s price bar, CREE traded to $27 before dropping back a bit. The last time I suggested getting aggressive with this stock was when it gapped down big on the Q1 earnings disappointment at the end of April at about $25.

CREE tends to trade very well when there’s a lot of media talk about the importance of evolving from incandescent bulbs to the new generation of chip driven LED bulbs. They last ten times as long and use 1/10th the power.

When the company has to deliver on numbers, it seems to disappoint Wall Street every time in a fairly big way.

In the early going I was convinced this stock would head to $50. I have withdrawn that opinion. They keep falling short on numbers, which means they don’t have the horses to get it done.

I don’t know why the stock traded up today. However, I believe it wants to fill the April gap and head back up towards $30. When (and if) it does, I am going to sell the stock and wait for another opportunity when it gets clobbered. Perhaps there is some international media on LED bulbs driving the stock right now. I’ll check the news feeds in the morning.

Aside from CREE, the market appeared to want to roll over tomorrow. We’ll see about the headline driven news and subsequent market move in the morning.

Aside from those two stories, it’s all quiet in microcap land, with no major change in the last day.

CREE Getting CREE’md

CREE has fallen below my SSL of $24, so it’s now worth taking a look at and planning a strategy.

Despite having a bleak technical picture right now, I am not going to sell the stock and take my loss quite yet.

This particular stock has a history of being pretty volatile- both to the upside and the downside.

It also tends to make multiple point moves once it gets headed in one direction or another.

The stock headed down in fairly nasty fashion today, but I’ve decided to tough it out.

Here’s why:

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The stock is now trading at its lowest level since early January. However, the volume involved in this week’s sell down is far from extraordinary.

The stock’s average daily volume as measured over the last 150 days is about 2 million shares per day. This past week the stock did not trade more than 2 million shares on any one day until today. It was trading more like 1/2 its normal volume, which isn’t much of a sell off as measured by volume.

Today the volume was about 25% above normal. Therefore, this could be the big blow off day of what is really not much of a blow off from a volume perspective.

I am going to wait and keep my fingers crossed for some kind of rebound in the not too distant future.

However, longer term, I am rapidly losing interest in CREE. Last quarter numbers were well below Wall Street expectations, and this stock is simply not participating in the alternative energy movement.

I am a big believer in the future of LED bulbs as a major component in energy saving, but CREE might not be the one. The market certainly is not enamored of this management team.

When some International publicity hits on the future of LED bulbs, this stock will trade back up, and that will be the time to get out.

Until then, I’m going to hang in there.

Comments and questions are welcome.

CREE Options- Out

FYI- for all those who are following the situation- I bounced out of my CREE options today with about a $1,000 profit on a $5,000 investment in 3 trading days. I am still holding the common. In short, the oversold bounce back trade worked, and I like to jump on the profits in these options when I get them quickly.

CREE- Pounded On Earnings- Jumping In

CREE came out with Q1 earnings yesterday after the bell, and the stock is getting killed on the market’s disappointment.

CREE delivered $.07 when the market was looking for $.11. Naturally, the stock is getting murdered.

If you read my March 5th BLOG, you will note I advised the time to really load up would be between $25.00 and $26.30.

Today’s action has taken us to those levels, and so far I have invested in 1,000 more shares of common stock at $26.35, and 25 $25 May Calls at $2.40.

Here’s the chart:

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While I’m sure there will be some backing and filling, I’m not going to worry about where we trade in the very short term. As long as the stock hangs in there in the $25 plus range, I’ll hang in there.

If it falls much below $25, I’ll start thinking of either adding to the position, or taking my losses and moving on.

The chart now has a huge, gaping gap from $30 down to $26, and I’m willing to bet my own hard earned cash that gap will be filled over the next couple of months.

While the numbers were a little troubling, owning this stock is a bet on the future of the LED bulb. I believe in it. I think it will become dominant technology over the next few years.

The market always over reacts emotionally in the short term. That’s one plus. Another- Cramer doesn’t like this stock, which in my mind is a huge plus. My BLOGS of late have been saying there is nothing to be done with CREE. Today, there is something to do.

Comments and questions are welcome.

Buying CREE

CREE got beat up on a disappointing earnings report. I am pouncing on the stock today as it has fallen back to the perfect technical level in my view.

So far, I have bought 1,000 shares of common stock and 25 call options. More, including chart, in about one hour.

Musings Of Larry Isen On Today’s Action: 3/25, 10:20 Pacific

This will be the first in a new series of daily blogs with some observations about today’s market action, especially as it applies to the current ideas I have in front of subscribers.

Open LEH Puts:

Well, the trade is working well so far. Earlier today I was up $2k on an $8k investment from last Friday, and tempted to lock in. Gave back $500 so far. However, since LEH was down yesterday on a huge up day in the markets, I have no reason to believe the stock is ready to head back up. Some downgrades today from brokerage firms, and they are rumored to be awash in bad mortgage paper. Let’s hang in another day.

VTOK: New Idea

The response to new idea VTOK was pretty anemic. I believe the story is reasonably compelling, but I don’t think the market really gets how big the Amerivon relationship will be. More will come out in the future.

SPKL:

Stock continues to languish on light volume. The company is doing great, but the stock needs a catalyst to get it moving again. They came out with their 10K, so I will do an in depth BLOG on it. Big winner in the next bull market.

EFSF:

Stock firming a little in a pretty brutal micro environment. I like the second test of the lows, and some volume starting to show up. Might get some legs in this one.

PNWIF:

Showing some signs of life today as it is oversold in a news vacuum. Costco services should start soon. Big winner in the next Bull market.

AAPL:

I missed it waiting for the all time bargain basement steal. I don’t believe the volatile madness is over, so might get another chance.

CREE:

In no man’s land. Sticking with my plan. I have my 2k shares in the mid 28′s- will buy more if I see it back in the $25 to $26 range- will sell calls against it in the $30s. Today, nothing to do at $29+.

Overall Market:

After a huge week and a big Monday, the market should be giving some ground, but it’s not. Bullish, but still half the day to go. The environment is finally improving a little, and perhaps the micro will start to show some signs of life before too long.

Nipping At CREE

I published a brief Blog yesterday so everyone would know I jumped into CREE as it finally fell below the $30 level I’ve been patiently waiting for.

I fully expect CREE to be a $50 stock in the not too distant future- perhaps within a year or even less. The LED bulb is going to slowly buy surely replace the incandescent bulb over the coming years as 1. Energy costs go up 2. LED prices come down and 3. Regulatory pressure to discontinue the use of LEDs increases. It has already happened in Europe- Asia is jumping on the bandwagon- the US will follow in kind.

Yesterday, I acquired 2,000 shares in the $28.60 range, and watched the stock rebound. Here’s the chart I as looking at:

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As you can see, the 61.8% retracement of the most recent move took us down to $28.40. It rebounded rather quickly, so I was able to buy at about $28.60.

The stock may want to go lower, in which case I will be prepared to pick up a little more, perhaps using options. Here’s the chart I will be looking at if it works much lower:

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This chart measures the stock off the November low, which is actually the more powerful chart.

This chart shows the 61.8% retracement at $26.31. If the stock trades down to that level, I will really load up with a tight stop of around $25.

Today’s level as I write this is $28.80- the stock has come back down from yesterday’s late climb, but not all the way to where I own it. However, I believe it is still a good level to jump in. Your choice.

Comments and questions are welcome.

CREE- Jumped In Today

A little patience pays of. Very quickly- I bought 2,000 CREE today at an average cost of about $28.60 and am bidding for 50 April 30 calls.

I believe it has pulled back to a good risk/reward ratio, but who knows. Could drop to $20 if the market continues to get super ugly- even more ugly than ever.

Chart and more details tomorrow.

CREE: Apparently, Green Is Good

I haven’t written about CREE in a while. In the year end tax selling binge, the stock briefly dropped below my SSL of $23, but I chose not to sell my 2,000 shares. Based based on where it is today, I hope you chose to hold on as well.

Just after the year ended, CREE made a very surprising and fairly robust rebound, heading from just under $22 to over $28 in six trading days. This, against of backdrop of every tech stock being taken out to the woodshed and beaten to death. What the heck is going on here?

The answer: sector rotation, and CREE is now perceived to be in the right sector.

As many of you know who have read my content on this company, I believe CREE has truly disruptive technology. They are the technology behind the new wave of LED light bulbs- destined to replace the incandescent light bulb we have all been using for over 100 years.

LED lightbulbs last 4 to 6 times longer than incandescents, and use less than 1/2 the power. The problem: cost- a regular LED lightbulb runs about $25 today. Despite being worth it, consumers have not shown a willingness to invest this much up front.

Nevertheless, LED lighting is coming. The transition away from incandescent is being mandated over the next five years by several European countries, and many feel the US is not far behind.

In fact, I was listening to Barrack Obama speak the other night, and he referenced sacrifices we would have to make to get energy consumption under control- he specifically stated we would all have to invest to “change our lightbulbs”. BTW- this is not a political commentary, so don’t bother commenting that you luv or hate him. Like it or not, it was on national TV in primetime.

CREE has patented technology for the chips that power LED bulbs. The price is expected to come down over the next two years quite rapidly, and CREE will get fees and royalties for every chip in every LED bulb.

Here’s the rub. For most of the second half of ’07, CREE was viewed as a “chip” stock, and semi conductor issues have been getting pounded.

In fact, the SOX index (semi conductor) is now trading down to levels unseen since September of 2004- that’s nearly 4 years of appreciation down the toilet.

Here’s what’s happened: the view of CREE has changed since the first of the year. As we turned the corner into 2008, the media began interviewing analysts and fund managers about their view of the right sectors for 2008. A common theme: GREEN- anything that saves both the environment and energy is considered green, and nearly all of them were touting CREE as a company embroiled in the green movement. With the democrats looking strong for late in ’08, green is even more “in vogue”.

To sum it up, the perception of CREE has changed from a chip stock to a green stock since the first of the year, and the proof is in the chart. Check it out:

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Here’s a chart overlaying CREE and the SOX Index. I put CREE in green (yes, it’s symbolic). Note they traded pretty much in tandem in December, and look how radically they have diverged in January.

CREE- now widely accepted as a GREEN stock, is a great one to be in for 2008. It has been immune to the recent big blow off in the market because it is now a GREEN stock, and as such will trade with a much fuller market valuation.

I don’t know if it’s a buy for a trade right now, but it should definitely be accumulated on dips for a trade, and anytime it’s below $30 for long term investors.

Comments and questions are welcome.

CREE Gets Barron’s Bashed

I absolutely love what’s happening to CREE right now. If you are following the situation, you know the stock has not traded well in the last week. The naysayers are out in full force, and they have the publicity machine fully geared up.

Last week, a rather obscure analyst published a sell recommendation on CREE, citing the company’s struggle to sell its products.

The stock swooned to about $28 for a day, and then rebounded to $29 the following day.

I don’t necessarily find fault with the analyst’s viewpoint. Perhaps sales will flounder a bit while we are waiting for adoption.

However, on Friday, I saw one of the most transparent pieces of journalism I have seen in some time. Barron’s, a widely recognized shill for short sellers, published an article bashing CREE, and citing the analyst’s report for all the reasons the stock should be in the teens.

Author Mark Veverka simply spews out a regurgitation of the analyst’s point of view, and embellishes the whole story. The bottom line- the short sellers who are short CREE didn’t get enough of a drop from the report, so a follow up article magically appears in Barron’s. CREE happens to be a very heavily shorted stock, shorts are looking for ways to bash the company.

Here’s where the whole thing loses credibility. Analyst Dorsheimer, and Barron’s author Veverka both claim GE will never buy the company. Here’s my question for you- How would either one of them know that? I feel comfortable making the assumption neither GE or CREE is telling these bozos what’s going on behind the scenes, and therefore they cannot know. I don’t have any idea if it’s going to happen, and moreover I can’t find out.

The shorts are upside down in this one. Today’s reversal is killing them, and the smear campaign could continue. Here’s today’s late chart:

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Sorry the chart is a little busy. Look at today’s sell off and reversal. We traded all the way down to $26.43, and are now trading in the $29.50 range.

Could the analyst be right? sure, numbers could be weak. Are you ready to buy a $25 light bulb, even if you knew it would save you a substantial amount of money in energy and replacement cost?

Keep this in mind. No matter who makes the bulb, they will be using a CREE chip. So, when the get the price down to $10 to $12, and everyone wants the bulb, you will be paying a lot more for the stock.

The shorts have given it their best shot, and the stock is coming back strong. It’s a strong buy.

Comments and questions are welcome.

CREE Gets GE’d

I am very disappointed in this past two day’s move in CREE- why? I mean, after all, the stock is up 9 points, or 36% since I first published the idea back in the August 25th edition. I’m disappointed because I only own 1,000 shares. I wanted to own more.

Let’s start with a look at the chart:

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As you can see, the stock has been on a tear of late. It’s charged up the charts about 5 points in the last two trading days on big volume. I felt like $30 had been fairly big resistance for the stock, so the breakout is very good news for longs.

It’s time to remind you of one of my tried and true trading rules- when stocks make big spiky runs, what do we do? We sell if anything, and we certainly don’t buy.

For all I know, this stock might just continue climbing 5 points per day. However, I feel like it’s a high risk entry point at this time, and I would avoid establishing new positions or adding to existing ones.

There are rumors of a GE buyout swirling around the company, and with the Bernanke put in place this week, the shorts are no doubt scrambling to cover. Short covering is primarily what causes big spiky rises in stocks- not new buyers. They go up like this when investors are forced to buy.

My target remains $50 in 2008, but I’d rather wait for a nice retracement and accumulate. The market deserves to cool off for a few days before making its next leg up. It’s been a hell of a good week.

This company still has the best LED lighting technology, and it’s going to replace the incandescent light bulb eventually. The GE rumor might just be for real.

Comments and questions are welcome.