In Case You Were Wondering
Just in case you were wondering, I thought it was time to provide and update on my latest ideas- one that has been rather disastrous, and one that is yet to be decided.
Shorting Magic Jack (CALL) for a quick trade and owning iTrackr (IRYS) have been my ideas over the last month, so here’s an update on both:
Shorting Magic Jack (CALL)
I’m not opposed to taking a bite out of both sides of the apple. Magic Jack (CALL) provided us with a generous meal this year as we notched a 400% gain on the call options I recommended back in January when the stock was $16. Now it’s $24.
When you think about the gain, it’s extraordinary. Let’s look at stock market darling Apple (AAPL)- over the same time frame, AAPL has risen from $400 to $600, while Magic Jack (CALL) has risen from $15 to $24. AAPL is up 50%, with CALL is up 60%. So far this year, CALL has been the better stock to own.
Last Friday I recommended going short CALL into their annual earnings report which, according to Yahoo!, was due out Monday after the market closed. I describe this kind of trading idea as an “Event Driven Trade”. The events leading up to recommending the trade are the upside movement in the stock over the past two months, combined with the earnings release.
It’s been my observation over many years of trading that whenever a stock runs up into an event- in this case the year end numbers, 95% of the time it will sell off once the proverbial cat is out of the bag.
In the case of Magic Jack (CALL), apparently Yahoo! and the management at CALL are not talking, and Yahoo! has it wrong. CALL has not released it’s 2011 audited financials, and as such the event I’m betting on has yet to happen.
In fact, if you look at the daily earnings calender, Yahoo! how has the company releasing its numbers every day. Sooner or later their calender will be right.
Fortunately, I chose to buy the April $25 put options at $3, which leaves me plenty of time to wait for the release.
Under normal circumstances, CALL is required to file their annual 10k audited financial statements today- March 15th. However, there are several factors which could affect the timing. If the numbers are not disclosed today, I believe the company has a grace period of a week or so, and then it can file for an extension to buy another 10 days if required to do so. When companies file for an extension, the market generally views this as a negative, so I would expect the stock to ease down during this time frame.
There’s one other factor that could effect the timing- CALL is actually a “foreign issuer”- the company is domiciled in Israel. This could effect the amount of time they are given to disclose their year end numbers.
So, we have no choice but to wait it out- at present, we are simply on CALL Waiting. The company itself has provided no disclosure about when its numbers will be coming out, but this could be one of those situations where they make some sort of announcement a day or two before.
I’m still long the April $25 puts.
iTrackr (IRYS) Clobbered -Attention Kmart Shoppers
My most recent penny stock idea- iTrackr (IRYS) is a bit troubling. There’s really no nice way to say it- this stock has been an absolute mess. This could end up being a great opportunity for those who either sat on the sidelines or sold on the way down, but the chart is just butt ugly.
There’s been a number of explanations bandied about. My own personal conclusion- I believe short sellers pounced on this stock and beat it down back on Monday, the 5th. The sudden drop caused existing shareholders to panic and just sell with little regard for price. Shorts targeted this one due to some rather inflammatory information that was published about the company.
As an young and under followed penny stock, the bottom simply fell out. The volume in this stock has been rather insane against an estimated “effective” public float of about 3 to 4 million shares. At present, the volume would suggest the entire float is turning over every 2 to 3 days.
I suspect this stock could be good for a bounce for a few reasons. For starters, their platform for marrying local consumers to local merchants is just getting off the ground. It’s only available in Beta Test version, but it’s very robust and has a lot of features that should eventually play well with both sides of business.
Secondly, if there is a big short in the stock, eventually the shorts will buy back and close out their positions. That’s how they lock in their profits.
A Fibonacci bounce suggests this stock is entitled to regain 38.2% of the ground it lost. If it does, the target price is circled in green on the chart. The stock would be entitled to bounce back to about $.38 which coincides with the 50 day moving average.
From today’s level, that would be a 52% gain, and a suitable risk. At this point, it’s unlikely there’s a lot of downside risk technically for the next few weeks, as it’s likely everyone that wanted to sell has done so- or pretty close to it.
I sold very little of my rather large position in this one on the way down, so I’m still holding quite a bit and hoping for a turn around.
There’s the update on both situations- just in case you were wondering.
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