The Long And Short Of It: ORCL, HPQ, CASY, SOLR, EUO

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September 07, 2010 at 04:11 AM

BY Dennis Hobein - Contributor, Stock Traders Daily

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Market Recap

Heading into the extended Labor Day weekend, the equity markets made an impressive push higher last week, bolstered by encouraging jobs data which indicated that the private sector added more jobs than expected. The data also showed that more unemployed people are entering the job pool due to a more optimistic outlook. This caused the headline unemployment number to tick up to 9.6% from 9.5%. Unfortunately, the momentum did not carry forward to this week, as the SPDR Dow Jones Industrial ETF (DIA) closed lower by nearly a percent. The primary culprit regarding today’s losses was from fresh concerns out of Europe, as new reports disclosed that some banks there may have more risky government debt than first thought. With little economic or corporate news disseminated here in the U.S., investors and traders mainly focused on these troublesome headlines. The news sent European stocks meaningfully lower, but the ProShares Ultra Short Euro (EUO) was very strong today, trading higher by more than 3%. As concerns eased from the European continent over the past few months, that ETF cooled off following a summer rally. Shares of EUO eventually slid lower to a $21 support area, but have recently been pushing higher off of that level. A much more thorough technical analysis for EUO is available to all of our subscribers, which points out key entry and exit levels while also providing crucial risk control tools to help optimize gains and minimize downside exposure.

Familiar Name Joins Oracle

Before the markets opened this morning, database software maker Oracle (ORCL) announced that former Hewlett-Packard (HPQ) CEO Mark Hurd would be joining the company as President. Market participants widely viewed the news as a strong positive as the stock surged higher by 6%. Given that Larry Ellison vehemently defended Mr. Hurd during his ouster at HPQ, this news isn’t completely shocking. Still, the move to ORCL is seen as a major plus given Hurd’s vast experience in the IT sector, and with his track record of improving cost structures and expanding margins. Furthermore, prior concerns about ORCL’s ability to integrate its acquisition of Sun Microsystems should subside since Mr. Hurd is coming from a hardware background. With today’s sharp move upward, the stock is currently approaching a resistance zone around $24.50. With a subscription to Stock Traders Daily, readers have full access to our complete trading report which provides a detailed look at every key support & resistance level, in addition to a complete trading strategy for ORCL.

Casey’s Reports Earnings & Rejects An Offer

It was a busy, but good day for Casey’s General Stores (CASY). First, the convenience store operator issued its first quarter earnings report which was essentially inline with analysts’ expectations and was not the catalyst for today’s strength. The more significant news was that CASY’s disclosed that it received – and turned down – a $38.50/share buyout offer from Couch-Tard. Additionally, the company stated that it already has a $40/share proposal in the works with another third party, although the company believes its value far exceeds even that higher amount. The buyout news sent the stock near all-time high levels, which is at the $39.50 mark. CASY’s has been a somewhat “under-the-radar” name, as it may surprise some readers to learn that its shares have more than doubled since March 2009. Even with the significant appreciation in the stock, CASY still has a modest price-to-sales ratio of .47x and a forward P/E of 13.8.

GT Solar Slammed On Secondary Offering

The market did not react kindly to news of GT Solar’s (SOLR) plan to do a secondary offering of 10 million shares. The company also stated that it intends to offer an additional 15 million shares to UBS and another affiliate in connection with an offering by UBS. Unfortunately for SOLR and its shareholders, the company will not receive any proceeds from either of these transactions, but will instead use the infusion of capital to pay expenses of the selling shareholder. Therefore, the end result is a major dilution of earnings per share, without the normal benefit of using the proceeds to fund the growth of the business. Investors punished the stock, sending it lower by whopping 12% to its $8 support area. Subscribers to Stock Traders Daily can access our trading report on SOLR which offers guidance on whether further shorting opportunities may exist on this stock, or whether this sell-off provides traders with a chance to play a rebound. As always, our reports feature integral risk control techniques to make sure that our subscribers get the most out of every trade.

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