A True Gem and a Fugazi
Two New Trades
Dear Bottarelli Research Member,
A fugazi is a fake diamond. In terms of stocks, today’s alert features both a flawless diamond and a cheap fake. I’ll begin with the true gem I think I’ve uncovered in eCollege (ECLG – NASDAQ).
The company provides the technology that allows colleges and universities to offer classes online. eCollege.com also sells their online courses to corporations who use their software to design and implement online training courses for employees.
This is big business. And the company’s earnings (and stock chart) reflects this in a big, big way. Just look at the recent news:
- January 9th 2006: New 52-week high.
- January 3rd 2006: Volume more than twice 30-day average.
- January 3rd 2006: Price move on heavy volume.
- December 27th 2005: Change in next year’s EPS estimate.
- November 14th 2005: Exceeded EPS estimates.
Trading under $25.00 a share, all signs point to further upside action in eCollege. So let’s profit off the move.
PLAY: Buy the eCollege March 20 Calls (EGU CD) at or under $2.20. The current bid/ask spread is $1.80 to $2.05. Place a protective stop loss at $1.00.
On the flipside of the upside action is Red Robin Gourmet Burgers (RRGB – NASDAQ).
On January 4th, the company issued a glowing press release saying they’re continuing their aggressive national expansion with the opening of their 300th restaurant.
Unfortunately, the numbers don’t point to solid growth.
Today, shares of RRGB are getting absolutely murdered, falling 25% after the company warned that fourth-quarter revenue would fall short of expectations.
Same-store sales increased 2.7% in the fourth quarter, coming in below expectations of a 3% to 4% rise. As a result , RRGB cut their earnings projection to 29 to 32 cents a share from 40 to 41 cents. This caused the stock to hit a 16-month low in today’s intraday trading. And judging by the chart, it’s poised to move even lower.
PLAY: Buy the Red Robin March 40 Puts (QZR OH) at or under $3.50, good for the day. The current bid/ask spread is $3.10 to $3.50. Place a protective stop loss at $2.00.
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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