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.

3 thoughts on “Nipping At CREE

  1. You wrote, “and 3. Regulatory pressure to discontinue the use of LEDs increases. ” Did you mean discontinue use of ‘incandescent’?

    Editor: Yes. I don’t recall the exact details, but you can find them is you look back through the archive section on CREE. I believe the incandescent bulb starts phasing out in Europe in ’09 and ’10. I believe Australia has jumped on the bandwagon as well. There is starting to be recognition that incandescent bulbs are big, inefficient energy gobblers and have toxic components as well. Many think the US will be close behind on new regs under the next Administration.

  2. I’m going to trade this one again AND/OR write some covered calls. Thanks for the blog today.

    Editor: I would buy it on the down day- then sell the calls when it is swinging at the higher end of its range. If it really runs up and you lose the stock, big deal. You made money.

  3. I have been waiting for a good entry point on CREE and am still waiting for my indicators to tell me. I use Bollinger bands, RSI and MACD. On bollinger, it’s been banging on the lower band for a while now, but it’s a hair above the 200 MA so I’m waiting for the stock to bounce off it. RSI & MACD are still on a down trend and I’ll wait till they turn up and even then will wait for a couple of days for confirmation (am not a day trader). My question is, if your analysis indicates that the stock will be around $50 within a year or less, wouldn’t you say it’s better to buy ITM leaps? Your thoughts.
    Thanks,
    Al

    Editor: I think the ITM leaps are a great way to play the stock without putting up that much capital. However, one strategy I plan to use is accumulate the stock on these pullbacks, and when it’s on the higher end of its range, sell some covered calls. I really love where I suspect the company will be one to three years. In this market, I don’t know if the one year time frame is $50, but they have a real multi national business and a theme that might go counter to the bear market.