9:10am (EST)
We often talk about Abercrombie & Fitch (ANF, $32.67, down $3.54) and Apollo Group (APOL, $63.94, up $0.24) in a negative light when we report the news on these two companies and there is a reason why. We don’t trust them.
As an option trader, you will learn there are quite a few stocks that you will love and hate and often times when you trade them it’s either call or put options. If you follow a company for a couple of years you will learn its price movements and trading ranges which allows you to make better trades.
Abercrombie dropped 10% yesterday when most Retail stocks rose after reporting upbeat sales for December. No, not Abercrombie.
We have talked about how stubborn the company is in slashing prices which has cost them business in a tough economic environment. The teen retail space is always a struggle but Abercrombie also has questionable business practices and lawsuits out the wazoo.
These two factors alone were the main reasons why we didn’t go long or buy call options in Abercrombie last year. The company reported that December sales dropped a whopping 19% versus Wall Street’s expectations for a dip of 12%.
Instead, in 2009 we profiled put options when the stock reached certain resistance levels and our subscribers banked profits of 25% and 120%, respectively.
Apollo actually made a slight gain yesterday and reported their earnings after the bell last night. Although they painted a pretty picture for Wall Street, the stock was down $3.20, to $60.74, in after-hours trading last night.
The company reported earnings that beat estimates by a penny but once again, the way they run their accounting department has raised some concerns. We made 4 trade recommendations on Apollo last year, all put options, and the returns were 100%, -15%, 50%, and -17%. Apollo is a volatile stock and we cut our losses once we saw a pattern reversal. Overall, our record was 2-for-4 for Apollo but very, very profitable.
The bottom line with these two stocks is that we never trusted them to go long in 2009 and we still don’t trust them now. We missed some double digit returns with Abercrombie yesterday but there may be a day trade in Apollo…
As we head to press, the jobs report was not that good and it is weighing on the market. Dow futures are lower by 18, S&P 500 futures are off by 3 while the Nasdaq futures are down 7 points. Current subscribers, check the Members Area for the trade updates.
]]>