Don’t Get Whiplashed & Possible Takeover?

Down 224, up 300.  Don’t try to be a day trader.  We’re seen a lot of volatility.  But, volume is still weak and we’re seeing about 73% up volume today.  So, still not that great of a day.  In addition, we’re at the 50-day moving average so you might see some selling next week at that.  Here’s the deal.  If a bull market emerges, we’ll see it and have plenty of time to run with it.  Don’t be a hero and try to be the first in on one 300 point up day. 

However, I am watching tech outperform and emerging markets like India & China.  Although Brazil is being left behind as it is considered a commodity country.  They are very rich in natural resources so as materials go, so does Brazil.  But, focus in on China & India.  I think they may have bottomed.

Possible Takeover

I started liking the look of Allegheny Technologies (ATI) a few days ago and it’s been outperforming to the upside.  It’s continuing today.  So I looked at the options and noticed that the August 50 calls which expire next Friday are very active.  The open interest in these options was 1061 and there have been over 7000 traded today.  Now, the produce of specialty materials including stainless steel, nickel and cobalt-based alloys is trading about $48.30.  The Aug 50 calls are trading around $1.00.  Remember, these are going to expire worthless next week if the stock doesn’t go up over $50 per share.  Also, there was big volume this morning on the stock.  There isn’t that much unusual volume right now on the stock looking back over the last few months.  But, someone thinks this is going over $50 in a hurry. 

So, could we see a takeover over the weekend?  Perhaps.  Looking at their competitors.  Allegheny has a 40% return on equity but their P/E is below 8.  That’s compared with their industry of 11 and an industry average ROE of 28%.  So, maybe a bigger metal company buys them for a premium. 

Just an observation.


(Disclosure:  I own some of the calls as of this morning.  The mention of ATI is not a recommendation to buy the equity or the options, just and observation.)


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August 2008
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