AEM Laid an Egg
Terrible Earnings Derail Our Thesis
PLAY: Sell your AEM November 65 Calls (AEM KM) on any bounce, good for the day.
Dear Bottarelli Research Member,
Sometimes, the best plans go south. This morning, that’s the case with Agnico-Eagle Mines (AEM – NYSE). Despite the fact that the U.S. dollar is moving down while gold prices are up (both of which we expected to see), AEM came out last night and laid an egg. They reported a quarterly net loss of $17.0 million ($0.11 per share). This is very disappointing, because in the third quarter of 2008 (when gold prices were much lower), AEM reported net income of $14.0 million ($0.10 per share). No bones about it, AEM let everyone down, and when it comes to earnings-based plays, this is always a risk. Adding insult to injury, Barrick Gold (ABX – NYSE) also reported earnings, yet their numbers were strong. So it seems like the gold price thesis was correct, but AEM simply didn’t perform the way we expected. Therefore, when it comes to our AEM November 65 Calls (AEM KM), use any bounce to exit the position. Sell on any temporary bounce. The current bid/ask spread is $0.90 to $0.95.
This will leave us holding only one remaining position, the FAZ November 24 Calls (FAY KW). As a protective play against falling financial stocks, FAZ continues to offer us a nice protective cushion. For example, if we see the major market averages reverse this morning’s gains and move lower, FAZ will bounce back quickly. So for now, maintain these protective calls.
As always, I’ll keep you fully informed on any new trading opportunities throughout the trading day. Until then…
Lock and load!
Sincerely,
© 2012 CSR Group, LLC. All rights reserved. Published in USA.
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