-- Posted Friday, 8 April 2005 | Digg This Article
Rick’s Picks
Friday, April 8, 2005
For investors who’d rather be smart than lucky
I put out an advisory intraday yesterday morning when Citi was looking feisty enough to drag the entire market higher. Not that it actually could, given that the bull market for bank stocks peaked in 2000. But Citi nonetheless remains one of the key bellwethers for a go-go era that has yet to dance it’s last shing-a-ling. And when the companies shares are looking particularly strong, or particularly weak, it is statistically most unlikely that the broad averages will be headed in the opposite direction.
Yesterday, they moved more or less in tandem, although on a percentage basis Citi stock rose three times as much as the Dow. Even more impressive, though, was that the high eclipsed the rabid-dog peak created by last Friday’s Greenspan-induced short-squeeze (even if the PHL Bank Index did not). We held some May 45 calls at the time and had an order before the opening to short a like number of April 45 calls against (for 0.20 more than we paid for the Mays). Unfortunately, we missed the top in the April 45s by a nickel, so we bailed out of the May 45s the next day, a scratch trade.
I noted at the time that the Greenspan spike would very likely mark the April options’ last hurrah. Now I’m not so sure. In fact, with April expiration still a week off, it’s just possible that Citi, which closed yesterday at 45.50, could get squeezed up to the next strike price over the next 4-5 days. All it would take would be a little scrimmage slightly above 47 -- by, say, no later than Wednesday – to put the fear of the Lord in those who have laid out April 50 shorts by the thousands with impunity. At that point, out-of-the-money Aprils would exert a magnetic pull on the stock that would make the last three points of the rally to 50 a breeze. You’d have to go back to August 2002 to find a week in which Citi shares rose by $5 or more. But stranger things have happened.
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Information and commentary contained herein comes from sources believed to be reliable, but this cannot be guaranteed. Past performance should not be construed as an indicator of future results, so let the buyer beware. Rick's Picks does not provide investment advice to individuals, nor act as an investment advisor, nor individually advocate the purchase or sale of any security or investment. From time to time, its editor may hold positions in issues referred to in this service, and he may alter or augment them at any time. Investments recommended herein should be made only after consulting with your investment advisor, and only after reviewing the prospectus or financial statements of the company. Rick's Picks reserves the right to use e-mail endorsements and/or profit claims from its subscribers for marketing purposes. All names will be kept anonymous and only subscribers’ initials will be used unless express written permission has been granted to the contrary. All Contents © 2005, Rick Ackerman. All Rights Reserved. www.rickackerman.com
-- Posted Friday, 8 April 2005 | Digg This Article
