Option Alert

Discussion in 'Options' started by mrswing, Feb 27, 2004.

  1. mrswing


    During the week starting Feb. 23, 2004 Qualcomm Inc (NASD:QCOM) experienced the most analyst activity on Wallsteet. Looking at the data below, you will see that most analysts are extremely bullish on Qualcomm and are revising earnings estimates in tandum.

    Looking below you will see that out of 35 retail equity analysts covering Qualcomm, 25 of them upgraded the stock's earnings estimate for the quarter ending in March 2004. Companies that have experienced the most earnings per share (EPS) revisions by analysts, are often superior swing opportunities. Let's walk through the data I have used to identify this superior swing idea. Thank you for your time!

    Top Analyst Activity

    Quarter # Of Estimates
    Sym. End Total New Up Down

    QCOM Mar. 2004 35 35 25 0

    ADI Apr. 2004 26 22 22 0

    BHI Mar. 2004 29 18 1 17

    BSX Mar. 2004 28 18 1 17

    Note: the table above summarizes companies that have had the most upward or downward earnings revisions by equity analysts in the past week.

    Larry's Top Option Swing:

    Qualcomm Inc. (NASDAQ:QCOM)

    Industry: Communications Equipment Sector: Technology
    Employees: 7,400 Market Cap: 51.3 Billion
    Website: http://www.qualcomm.com

    Swing Trade Information:

    Trade Strategy: (Buy Call Option: AAOLC)
    Trade Targets: Common (5 %) / Option (30%+)
    Trade Composition: 30 % Technical / 70 % Fundamental
    Trade Duration: 1 to 15 days

    Option Alert Data:

    Symbol: AAOLC Type:Call Exchange: Amex
    Strike Month: March Strike Price: 60.00

    Entry Data: Buy AAOLC When QCOM Trades Below $ 67.00
    Exit Data: Sell AAOLC When QCOM Moves 5% (Above Entry)
    Stop Loss: Place 4 % Mental Stop-Loss: Based On Common
    *see Larry’s tips at bottom*

    Company Summary:

    Qualcomm, Inc. develops, designs, manufactures and markets digital wireless telecommunications products and services based on its code division multiple access (CDMA) technology. The Company develops and supplies CDMA-based integrated circuits (ICs) and system software for wireless voice and data communications and global positioning system (GPS) products to wireless device and infrastructure manufacturers

    Fundamental Analysis:

    Based on my fundamental analysis of GSI Lumonics Corp., I beleive their share price is currently fair-valued compared to industry peers and has an average risk or safety profile. However, my current Swing Value Price (SVP) for this stock is $70.50; which is 41 times First Call’s 2004 consensus estimated earnings of $1.72 and 10.7% above Qcom's present market price of $63.70.

    My Swing Value Price used above is derived from forecasted revenue and earnings data, estimated cash flow re-investment and growth, earnings surprise data, debt analysis, and investor sentiment analysis. Note that I use First Call and Reuters Research equity data. Both firms are leading global providers of accurate equity research and data.

    In addition, Qcom's earnings are expected to grow by 12% this year and by 15.2% next year.

    Technical Analysis:

    Qualcomm’s short-term technical (buy rating) has moved up from 80% at the end of last month to over 95% on February 26, 2004. This explains the stocks strong uptrend, of which is a direct result of above average momentum, relative strength and rising balance volume.
    Also, the stock's current long-term technical (buy rating) is 86%, placing it in the top 15%, in terms of technical bias, of all equities trading on US exchanges. My technical scores are derived from 20 different technical indicators coupled with short and long-term moving averages. A short-term technical rating above 70 indicates a bullish trend.

    In the short-term, QCOM “may” consolidate before resuming its long-term trend. Also looking above, any technical rating (short or long-term) above 70 is considered "Bullish". And a technical rating above 85 is considered very "Very Bullish". Moreover, my short and long tech scores are based on a proprietary software model of mine that utilizes over 20 different technical indicators and several moving averages.

    Technical Statistics:

    Short-Term (Technicals) Mean Rating: 95 % Buy
    Long-Term (Technicals) Mean Rating: 86 % Buy
    9-Day Relative Strength Rating: 71.8
    1 Month MACD Study: Neutral Bullish
    1 Month Stochastics Study: Neutral Bullish

    Price Support Pivot Point Resistance
    $63.70 $61.29 $63.13 $64.97

    Fundamental Summary:

    2002 2003 2004
    Revenue: (mil.): 3039. 3970. forecast
    Earnings Per Share: 0.43 1.01 1.68

    Current (Yrs.) EPS Growth Rate: 21% (1.42 to 1.72)
    Next Year’s EPS Growth Rate 5% (1.72 to 1.81)
    Average Earnings Surprise (last 4 quarters): 6.3 %

    Analyst Ratings & Key Data:

    New 52-Week High: $ 63.76 (Feb. 26, 2004)
    P/E Ratio: 36.1 vs. Industry Average P/E:42.0

    Positive 8/17/0 Week MACD Break-Out
    Positive 12/20/6 Week Momentum Break-Out

    Average Analyst Recommendation (this week): 2.0
    Average Analyst Recommendation (last week): 2.5
    (Strong Buy 1.0 – 5.0 Strong Sell)
    Number of Brokers: 6 Mean Price Target: $65.00
    Larry's Technical, Momentum and Volume Ranks: All High (bullish)

    Larry's Recommendation:

    In summary, QCOM technically has bullish, short, medium and long-term trends and is poised to continue its upward momentum in the short-term. Alternatively, QCOM has strong fundamentals and excellent growth prospects. Therefore, based on my overall research of Qualcomm Inc. I am rating QCOM a “Short-Term Buy.”

    Larry’s Trading Tips:

    1. I do not recommend using stop-loss orders on options, as they are too volatile.
    2. I recommend that you use mental stops based on the underlying price of the common stock.
    3.“If” the trade by chance works against you don’t hesitate to sell all of your options “at market” once the common’s 4% stop loss is reached.
    4. Practice buying on weakness and selling on strength, if possible.
    5. Always let your winners run. Therefore, sell 50 % of your original position once your options double in price. And repeat this process for each corresponding 100% rise in your option price. This will ensure that will you truly buy low and sell high, and even higher yet.

    Other Top Option Swings: MAXS, GLDG, LPMA, IDSA

    Note: The best way to capitalize on my swing ideas is to invest in one or more of my value-added subscription services. I want to teach you everything I know about swing trading options. I challenge you to put my knowledge and trading success to work for you today. Thank-you again for your time!

    ...thanks for the trust you've shown in me and my business.
  2. dgmodel

    dgmodel Guest

    are you taking the position or just supplying us with information or both???
  3. on your QCOM recommendation you say buy call option : AAOLC

    do you mean AAO CL...... the March 60 calls?

    :p :p
  4. bebe


    "Other Top Option Swings: MAXS, GLDG, LPMA, IDSA"

    What options would you play on IDSA? (tricky question)

  5. mrswing,

    Thanks for the analysis. Keep it coming.

    Now about strategy. You seem to be playing purely for a directional move. Wouldn't just buying the common be a better play? Are you using the options just for leverage? I haven't looked at this series, but I would have thought a bull spread might be a better way to play it if you wanted to use options.
  6. also what is GLDG? :p :p
  7. bebe


    "Other Top Option Swings: MAXS, GLDG, LPMA, IDSA"

    What options would you play on IDSA? (tricky question)"

    How about those LPMA and MAXS options?
    :D :D
  8. Though it has higher risk, on a short-term move a straight call will always outperform a bull call spread.
  9. Will it? Always?
  10. Yes. On relatively quick moves, the appreciation of the naked long call will always be greater than the amount by which the bull spread will have widened (assuming comparable deltas).
    #10     Feb 28, 2004