Thursday, May 22, 2014

Thursday's Prospects: Round 2

Out of eight symbols that survived my first round of analysis (see "Thursday's Prospects"), the final choice comes down to two: Bull signals on RCL and NFLX.

The two bear signals, KIOR and ZGNX on the small-cap list, lacked sufficint open interest on their options for me to construct a bearish position.

One bull signal, CSOD, has a bearish ranking from Zacks Investment Research. I generally prefer that the signal and Zacks be aligned.

Two had options problems -- either wide spreads or low open interest -- that make them less desirable: BWP, LPL and ECL. These are bull plays and so could be done as shares, but I prefer leverage and the ability to hedge that options bring.

Of the two remaining symbols, RCL has had a far rockier ride than NFLX has. RCL had a huge a decline during the Great Recession, bottoming in 2009i, and is only now approaching its pre-recession high set in 2004.

NFLX saw only relatively shallow, yet significant, corrections during that period, such was its upward momentum.

Both stocks are liquid, although NFLX is more so. RCL has a bullish rating from Zacks, and NFLX's rating is neutral.

RCL is selling below the price implied by its growth. NFLX is selling for more than three times that price.

NFLX is way more volatile, with implied volatility at 39%. RCL is volatile, but at 24% it fails to measure up to NFLX. Higher volatility means greater risk, of course, but also greater opportunity to profit.

A tough choice. I like NFLX's chart better, although both charts strike me as having a bearish shadow looming over them. I like NFLX's greater volatility, as well.

NFLX is a tech innovator that single-handedly created the market for streaming films and TV series. RCL is a cruise line. Personally, I find NFLX to be a lot more interesting.

I intend to write an analysis of NFLX and shall post it before the closing bell today. I'm adding RCL to the Watchlist and may come back to it in the next few days.


My shorter-term trading rules can be read here. My longer-term trading rules can be read here. And the classic Turtle Trading rules on which my rules are based can be read here.

Tim Bovee, Private Trader tracks the analysis and trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment.
No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decisions for his or her own account, and take responsibility for the consequences.

Creative Commons License

All content on Tim Bovee, Private Trader by Timothy K. Bovee is licensed under a Creative Commons Attribution-ShareAlike 4.0 International License.

Based on a work at

No comments:

Post a Comment