THE ARORA REPORT
HIGHER REWARDS, LOWER RISKS

No Verbosity,
Just Clear Actionable Information
ZYX SHORT SELL CHANGE ALERT
 April 2, 2011  Issue: YIVZYIIZYXIZ40B
ALL AROUND ALERTS

An All Around Alerts  issue tracks every open position from cradle to grave and  every recommendation that has not yet filled.  It provides Immediate Alerts for urgent actions needed on existing positions and provides one new idea  in detail or revisits an existing idea in detail.  It also provides On Our Radar Alerts that do not yet satisfy all six screens of the ZYX Change Method but can still be lucrative.
New subscribers: Please seeZYX Change Method Trade Management Guidelinesfor terminology.
IMMEDIATE ALERTS NEW FEATURES

HOT TOPIC (HOTT)

We are short from an average price of $9.75.  Yesterday, the stock closed at $5.54.  This is a gain of 43%.  We are raising our target buy to cover zone to $5.00-$5.60.  Depending on the market conditions, we will try to cover close to the bottom of the zone, but it is important to not let the profits slip away at this point.   We are also lowering the Stop Zone as shown on the chart.

 There are several new developments for this change. 

·      On March 28th, the company announced it was closing its money losing ShockHound.com business.

·  The unsuccessful Chief Merchandising Officer Amy Kocourek has left the company.

·  The company has hired Lisa Harper as the new CEO.

· Lisa Harper is assuming direct oversight of Merchandising.

·       The company seems to be looking beyond its Goth and music roots.

·   The Charlie Sheen t-shirt has become a hot seller. It is bringing new traffic to the stores.

 This is the time to exit this profitable position.  We suggest covering on every dip. 

We are committed  to consistently improving our  Alert Services  to increase profits and lower risks for our subscribers  for the years to come. Based on your feedback, we have added several new features to help our subscribers better utilize the type of research and techniques normally available only to the top hedge funds.
  • Addition  of  target zones in every issue
  • Specific  actions on  the core position quantity
  • Specific opportunities to trade around  the core position  quantity with the potential to double returns
  • Catering to the wishes of both long-term investors and short-term traders
  • More opportunities for those who are both long-term investors and short-term traders

 
 
NEW RECOMMENDATIONS
AVID TECHNOLOGY (AVID):  MARKET SHARE IS SHRINKING

Potential Reward:                  Very High
Potential Risk:                       Low*
Probable Holding Period:     Short-Term
 *For an exit before April 21st.

Avid specializes in video and audio production technologies.  The company was a pioneer in digital non-linear editing.  Non-linear editing is a technique where the edited version is created not by rearranging the original, but by creating a detailed list of the edit points.  Then, the software reads the edit points and creates a new version. 

  • CHANGE SCREEN

     For a long time Avid has been the gold standard and still continues to maintain its lead.  However,
    Avid has been facing increased pressure from Apple (AAPL) and Adobe (ADBE).  Final Cut Pro from Apple seems to be rapidly taking market share.   

    Through acquisitions, Avid has brought to the market lower priced products, but in general, most suitable products from competitors are cheaper.  

    Avid has a new management team that has been cutting costs and restructuring the company.  The company reported blow out earnings for the last quarter and the stock jumped.  Our research shows that over a period of time, Avid will continue to lose market share in all segments with the exception of the very high end, such as editing of high budget movies like Avatar.  The company's accounts receivables grew faster than the revenues—this is always a danger sign. 

  • GLOBAL FUND FLOW ANALYSIS SCREEN

    At The Arora Report, our computers have been monitoring every tick of trading in Avid stock and feeding the data into our proprietary algorithms. The smart money is selling this stock.

  • THEORY ZYX CHANGE SCREEN

    Here we make two determinations: how fast the market share is shrinking and how long can the new management pull a rabbit out of the hat in terms of a temporary bump in earnings. The screen is supportive of a short position with a tight stop.

  • QUANTITATIVE ANALYSIS SCREEN

    This screen shows that the fair value of this stock is $14.00. 

  • TRIGGER EVENT SCREEN

    The trigger here is increasing popularity of the competing systems from Adobe and Apple.

  • TECHNICAL ANALYSIS SCREEN

    This screen is supportive of a short position with a tight stop.

Trade Management

We will adhere to  the   discipline imposed by the   ZYX Change Method Trade Management Guidelines.    We have no way of knowing if the management will be able to surpass  the consensus estimate in the coming quarter, although it is clear that over a long period of time the earnings will have a downward trend.     It is a relatively low risk trade if we are able to exit with a gain prior to the next earnings release scheduled for April 21st.  If the earnings are not good, as the chart shows, there is a potential for 40% gain. On the other hand, there is a probable risk of as much as 15% if the earnings beat the consensus.  The other note of caution is that there is high short interest, and thus, a chance of short squeeze is real.  If a short squeeze appears to start, we recommend immediately exiting the trade.



 
Short Sell Zone:                     $22.00 - $23.60
Target Zone:                           $13.50 - $14.95
Stop Zone:                                $24.02 - $24.52
 
ON OUR RADAR SCREEN
SOTHEBY'S (BID) 

Sotheby's is a duopoly with Christie's in the art auction market.  The stock has been red hot because of the huge success of recent art auctions in Asia.  Newly minted millionaires in India and China are throwing money at art.  Last night, Asian collectors snapped up cases of Burgundy such as Romanee Conti and Montrachet for $14 million at the start of Sotheby's two day Hong Kong auction.  A case of 1990 Domaine de la Romanee-Conti  sold for HK $1.8 million   Such high prices may pour gasoline on the fire in Sotheby's stock.  If the stock runs up to $56.00-58.00, it will be a good entry point.

Investors seem to be oblivious to the fact that the bulk of Sotheby's business comes from the United States and Europe.  Both of these markets are no where near as strong as the markets in Asia.  The quantitative screen on the ZYX Change Method shows the fair value of this stock to be $45.00.  At present, five of the ZYX Change Method screens are negative and one is positive. 
TRADES CLOSED SINCE THE LAST ISSUE
NVIDIA (NVDA)

This was a very profitable trade.  Our average short price was $25.54, and in a matter of days we were able to cover the bulk of our position at $17.65.

Potential New Trades

 There are no trades for investors at this junction, but traders can trade in both long and short directions.  If the stock starts breaking decisively below $17.40 along with the weakness in the semiconductor group, traders may consider short selling with a target of $15.00-$16.00.  On any big bounce, the stock is a short for both investors and traders.

iPATH MSCI INDIA INDEX ETN (INP)

We were right on the mark in going short at the top of the Indian market and profited handsomely from an almost 25% correction.  We were short from $82.77, and the stock dipped to $62.93. 

Potential New Trades

Inflation in India, especially food inflation, is not under control even with very high interest rates.  The markets have bounced due to a very constructive budget by the central government of India.  When the present bounce runs its course, we may get another opportunity to short sell to profit from another leg down in the markets. 
NEW RECOMMENDATIONS NOT YET FILLED
At this point, we are cancelling the open recommendation to short sell JDS Uniphase (JDSU), Finisar (FNSR), and Taylor Devices (TAYD).
NEW FILLS SINCE THE LAST ISSUE
CAMERON (CAM) 

So far, this trade is working out as planned.  We are short from $59.25; our short term target is around $53.00, and a little longer target is around $50.00.  The stock closed at $56.62.  We recommend tight trailing stops on 75% of the position.  We are holding 50% of the core full size quantity.  The plan is to take partial profits if the stock bounces and then short it again. 

PRO SHARES ULTRA SHORT 20+ YEAR TREASURY  (TBT)

This is an inverse ETF.  The ETF goes up when the bonds to down.  The trade here is that inflation will rise, and the Federal Reserve Bank or the markets will raise the interest rates.  As interest rates rise, bonds go down.  When bonds go down, TBT goes up, as it is an inverse ETF.    

This ETF was highlighted in a Quick Alert.  To short sell bonds, we have to go long on this ETF. We are now long 30% of the core position  from an average price of $35.75. The ETF is now at $37.11. Here are the new zones.

Buy Zone:                              $31.00 - $35.75
Long-Term Target Zone:      $48.00 - $50.00
Short-Term Target Zone:     $38.90 - $41.90
Stop Zone:                             $28.00 - $28.90


Those not in TBT may consider buying it on pull backs.  Aggressive accounts may consider taking liberty with our Buy Zone and start accumulating lightly at a somewhat higher price.  This is a very long-term position.
EXFO ELECTRO OPTICAL (EXFO)

The old saying that the early bird gets the worm applied to this trade. The premarket fill was at $9.78.  Those who waited for the regular market to open could do no better than $9.25.  Since the stock hit our Target Zone, covering a majority of the position at $7.90 was in order.  Now we hold only 5% of the core full position quantity.

Those not in the stock may consider short selling on any significant bounce.


ZAGG (ZAGG)

We are short from $8.10.  New smart covers from Apple for iPad, as described in detail in the last issue, are selling like hot cakes.  ZAGG is going to have a difficult time competing with its present technology.  We are holding 25% of the core full size quantity.

Those not in the stock may consider short selling on any bounce.

Short Sell Zone:                   $7.50 - $12.00
Long-Term Target Zone:    $2.00 - $3.00
Short-Term Target Zone:    $5.00 - $6.20
Stop Zone:                            $12.10 - $15.10
 POSITION UPDATES

ACORDA THERAPEUTICS (ACOR)

We are short with an average price of $30.98.  Now the stock is at $22.91.  Our negative thesis on the company's main drug ampyra is playing out.  We are holding short 75% of the core position full size quantity.   Our Target Zone remains $15.00 - $17.00.

Those not in the stock may short it on any up spike, if  there is no game changing news. 

CAMERON (CAM)

Please see above

DENISON MINES (DNN)

We are short from $2.91.  We are holding 31% of the core position full size quantity.  Our Target Zone remains at $1.00 - $1.55. Please see the prior Quick Alert for details.

Those not holding the stock can start scaling in a short position on bounces.

EXFO ELECTRO OPTICAL (EXFO)

Please see above.

MOTOROLA MOBILITY HOLDINGS (MMI)

We are short this stock from an average price of $36.00.  When this alert was written, the stock was at $24.50. 

We were holding 200% of  the core full position size.  This simply means that in addition to our full core quantity, we were also holding an equal amount to simply trade around the core position.  As an example, if a subscriber has a full core position size of 1000 shares, and the subscriber has followed our alert service exactly, the subscriber at this point would be holding 2000 shares.

A Quick Alert informed subscribers to buy to cover 50% of the trade around position at $24.12. To protect profits, we  lowered the Stop Zone for 25% of the trade around position to $24.61 - 24.76. This stop hit, and  the profits were realized.  The  Stop Zone on the remaining 25% was lowered to $25.26 - 25.51.

In the Quick Alert, the Stop Zone on the core position was lowered to $26.26 - 26.61. Now we are holding 125% of the core position full size quantity.

We recommend that subscribers switch over to trailing stops, i.e., keep on lowering the Stop Zones if the stock goes lower.  We also recommend taking additional profits at $23.26, $22.52, and $22.11. 

If not already in the stock, investors should not short this stock at this point but should wait for a bounce instead.

OCCIDENTAL PETROLEUM CORPORATION (OXY)

We are short with an average price of $106.75.  Now the stock is at $104.30.  Occidental has significant operations in Libya.  As we correctly predicted, strife in Libya is turning into a civil war.  We suggest that the readers be very alert to developments in Libya; if it appears that the situation is getting better, immediately buy to cover. 

We are  holding 5% of our core position quantity.  Our Target Zone remains at $75.00 - 82.00.

Those not in the stock may consider short selling this stock if there is news of  damage to oil facilities in Libya or if oil starts falling. It is best to hedge this position by simultaneously going long the ETF XLE.

PRO SHARES ULTRA SHORT 20+ YEAR TREASURY  (TBT)

Please see above.

ZAGG  (ZAGG)

Please see above.

 
Please make adjustments, as you see fit to suit your risk tolerance, your experience, and market conditions. You  must make your own judgments with the help of your own  personal advisor independent of the content herein. The content herein may not be suitable for your purposes and your situation. Nigam Arora or The Arora Report,  Ltd, its directors, its officers,  its employees, and its affiliates  are not your advisors.

By reading this content, you expressly agree  without exception to all  Terms of Use  
 © Copyright The Arora Report                                          Contact Us