Titanium Metals (TIE) …strange activity

One of my favorite stocks from a while ago (click for the iBC archive… LoL!  Looks like I REALLY liked this stock), Titanium Metals Corporation [[TIE]] , is back from the dead.  So far, the stocks has moved about 50% from is August low… all on heavy speculation.   On what?  Most likely, a buyout.  But I’ve heard this story so many times before.  Investors will tell you that RIO wants TIE.  They certainly can afford it.

Here’s some of my notes:

• Technicals show a nice breakout above the moving averages.  Look at that volume!  Huge block trades, so wait to see if a Form Schedule 13D is filed in about 2 weeks.  That will tell you who is interested in TIE.

• Huge bullish speculation.  Maybe Adam can tell you more about this, but there was some MASSIVE call buying going into TIE two weeks ago.  Over 60,000 calls on the October 12.50… which are NOW in them money.  Insider trading.
• Harold Simmons, who is now about 183 years old, is the largest shareholder of the company.  You may also notice there is a holder called “Contran Corp”… that’s basically him too.  Ha.   This guy has been averaging down on the company for a while, but I guess all he cares about is majority ownership.  Why is this in my notes?  Due to his age, I can see him making big moves for the company, like transferring ownership, putting it up for sale.  And if he dies, then just as Jobs is to Apple, the stock would take a beating.  Basically, Harold Simmons, aka “the Ice Man”, is on a slim time table, which means TIE is too.  Really, if you are invested in TIE, it would be a good idea to buy OTM puts as a hedge due to this added risk.
• I wasn’t that impressed with TIE’s last earnings report, as their income is down as well as other growth numbers.  However, metal prices are going up, which is probably why the sector which includes stocks like RTI International Metals, Inc. [[RTI]] , are moving up.

How to trade TIE:

• Well, it already is in a breakout, so you can ride the trend.  However, keep September 10 in mind because the recent quarterly dividend will be paid to shareholders on record before that day. 
• I will try to short TIE around September 13, a few days after the dividend closes.  Also, be sure to watch $12.90!  If TIE holds that number, then enter for a swing long.
• Regardless of news, I hope to do a “retracement trade” shorting TIE around 15.20, which would be a nice profit-taking point.  That would mean the stock would have moved nearly 60% since the beginning of August.  This is a classic smart money sucking in the dumb money, aka “pump and dump” candidate on the short term.
• If you are into the rumor about a possible buyout (which I don’t think will happen), then you can throw some money on the $15 strikes.
• For you day traders, short TIE on profit taking, which could happen as early as tomorrow.  I wouldn’t be surprised if TIE dropped 7% tomorrow.

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My stock satellite is picking up some activity in GeoEye Inc. [[GEOY]] , which evidently is a satellite company too.  I’m expecting some waves in GEOY sometime soon as a big event is in store for them:  the launch of a new satellite on September 4th?  Or was it October 10th?  Who knows! 

Here’s the buzz:

GeoEye is responsible for many of the satellites and technology currently being sent into space to take detailed imagery of the Earth.  The company hit a nasty speed bump (see chart below)  when one of their satellites failed to work in the 1st quarter of 2007, called the GeoEye-1.  Yes, 18 months ago!  Well, here’s what’s up.  GEOY doesn’t ever post the launch dates on their website.  Kind of queerish.  But I’ve heard a lot of investors are expecting the launch on September 4th.  However, like a nerd doing his DD, I checked the launch schedule on NASA’s website, and it says it will launch on October 10 now.   Expect volatility baby!  Every little delay will give investors a kick to the groin.

Here’s the blah blah blah blah:

“GeoEye, Inc., together with its subsidiaries, provides space-based, and aerial imagery and geospatial information. The company, through an integrated receiving, processing, and distribution network, delivers high-resolution and low-resolution imagery, imagery-derived products, and image processing services to customers worldwide. Its imagery information products enable customers to map, measure, and monitor the earth for intelligence gathering, precision mapping, construction planning, and environmental monitoring applications, as well as provide image-derived geospatial intelligence, image processing, and photogrammetry services.” – Yahoo Finance.

Here’s the story, as told through a chart, crayons and a ruler:

Link:  Technical chart for GEOY

• Double bottom around 16
• Nice reversal on the 50 SMA
• Right at resistance of 22.63, which is the top of the downtrend channel.
• Volume is very light

Other rumors:  These are not confirmed, but we have heard that the employed scientist of iBankCoin are developing their own satellite, fully equipped with lasers.  We have heard rumors they are planning a low earth orbit launch to target all the oil fields in Iraq.  Currently, iBC already has a satellite in orbit.

Above the comments:

So, can GEOY launch?  Wow, I hope so.  The launch, or no-launch, could serve as a good catalyst for this stock to move.    I see a possible options play, since buying puts around 15 is a good protection.  Also, be sure to watch the options activity for the rest of the week.  So far, options on the call side is picking up, especially September… Hmmm, I wonder why.  Then again, I guess it would be pretty sweet if you bought puts and the darn thing failed to launch AGAIN.  Wow, that would be a blow to investors.  Well, that’s all I can say.  Who knows, maybe this will be a nonfactor event.   Oh yeah, almost forgot to mention, Google plans on using this GeoEye-1 to upgrade their Google Earth images?  Good job GEOY.  I like GEOY on the longterm, but there are a lot of ways to trade the volatility heading into this highly anticipated launch.

Nevertheless, I like the name of the company, “GeoEye.”  If the stock drops in September, I’ll rename it.. “GioBlackEye.”  If the eye does launch, kiss your privacy good bye!  We are watching you.

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Look at today’s tape.  Now don’t let it lie to you…

These rallies are not good for contrarian plays or any other plays. 

Bad for Bears:

I wouldn’t feel comfortable entering a short here.  I usually call these a “trickle-up”, and these can bring a slow death to the bears.  These nonsense low-vol rallies usually last longer than your ego can handle.  What you really want is a spike, one coupled with…

1)  proper correlations.  We do not have that right now.  Oil is up, and the market is up?  

2)  You need a rally with a large intraday spike down on the Vix.  That signals that the dumb money is in.  Right now we are just coasting down on the 1-day and 1-month.  As I’ve stated before, at this moment, I would feel comfortable shorting with a Vix spike below 19, maybe even an intraday dip below 18.

3) Let the market get overbought a little.  Remember, there are more bulls than bears when you view a stock as a ratio for shares outstanding.  Therefore, when the market is quiet, the bears will most likely lose.  I spoke earlier about the importance of using probability in low volume markets, and this illustrates why.

Bad case for the bulls:

1)  First of all, I will come out and tell you that this market is NOT THE SAME as the one we had from November to January.  Now that was a nice bear market, that naturally led to a real squeeze.  Its gonna be hard to top that short-cover rally in September.  Although I think we can squeeze, I doubt it will be as powerful.  The bear market stage we are in is the boring one, and you don’t get nice powerful squeezes on those.  Its kind of like an inverse-wave theory.  From a contrarian’s point of view, you want the Vix to be much much higher, in the high 30s or even 40s to get an epic rally.  We call that “capitulation.”  THAT is when you want to get really bullish.  Think of it as a forest fire that torches the land.  It is immediately after the entire forest is burnt where you get the fastest growth. 

2)  A tradable rally on the long side also needs volume and what we IBD readers call a “follow through day” (FTD.  I’ll explain more on this later, but for now a FTD is 1% gain in one of the major averages accompanied by an increase in volume over the previous day).  So far, according to IBD, we have had 1 FTD in the Nasdaq last month and that made those bozos print that the market outlook was “confirmed rally” (something like that.  I forget)  Now, if you look at your latest IBD paper, it will say “market rally under pressure.”  That was the shortest “rally” IBD ever printed on their papers in as long as I could remember!  Contrarian bears love that kind of stuff… they are thinking that a lot of people got tricked into the chicanery of the market, dipped in, and are jumping ship.  In other words, the probability for panic selling has just significantly increased.  Stuff like that is probably the reason why the Vix is under 20… too much complacency, and not enough capitulation (ah!  Another powerful contrarian rule!)

3)  The Cramer-effect… I’ll add this one for fun, but lately he has become a powerful contrarian tool.  Right now Cramer is trading on emotion.  It worked in a bull market like 2006-2007 because any blind monkey could just pull out the top 10 gainers on Yahoo Finance, buy em, then sell higher.  Trading on emotion works the least in bear markets.  But anyway, I will describe the “cramer-effect” as the media’s perspective.  For now, you want the media to sensationalize doom before getting long.  I’ve posted about that before (http://www.thehawaiitrader.com/2008/07/yahoo-finance-sensationalizes-doom.html), and those usually lead to very good short short squeezes.

Anyway, that was just an intro to how contrarian investing works.  Really, your best tools are the Vix, the put/call ratio, and volume.  That’s all you pretty much need to spot a REAL reversal in the market.  Just remember, it works BEST when market volatility is high!  So wait for the volume to pick up, and I mean really pick up, before choosing a side.

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I’m not sick.

I’m ill.

Short [[meli]].  Heading to the teens.

Stuff that makes you weezy:

•  stock’s P/E ratio  is a rEdiCkULeSs 150 times trailing earnings, or something like that.  Great growth story, but no happy ending just yet.
• Insider selling up
• When eBay Inc. [[ebay]] breaks 24, watch MELI drop sick.
• Pair trade this:  Keep your eyes on Gmarket Inc. (ADR) [[gmkt]] , the Korean version of eBay, which has sneakily moved up.  Get long above 26 while shorting MELI.
• Internet usage in Latin America:  http://www.comscore.com/press/release.asp?press=2247

Above the comments: 
I would like to get long MELI in like a year from now, but they have nothing on the bottom- sales is weak, user base is weak, hype and hope is high.  Smells like a spec stock to me.  I like GMKT better, but don’t like eBay.  eBay needs to offer something fresh, because its lagging in the innovative department, and their stores are diluted with crap.  A MELI, a MELI, a MELI… What the heck was he saying here?  I don’t care, it sounds ill…

“I go by them goon rules if you can’t beat em then you pop em,
You can’t man em then you pop em,
You can’t man em then you mop em,
You can’t stand em then you drop em,
You drop em cause we pop em like Orville Redenbacher”

– Tha Carter

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New shorts:  RIMM (125.70), NFLX (30.00), WIRE (18.80)

New longs:  IEO (68.23)

Nothing great showing up on my screens.  Solarfun Power Holdings Co., Ltd. (ADR) [[SOLF]] and Energy Conversion Devices, Inc. [[ENER]] reports this week.  You probably can play a strangle on ENER.

I’m thinking about getting long Fossil, Inc. [[fosl]] as a contrarian play against myself.  It’s one ugly chart on almost every time frame except the 2-week.

Illumina, Inc. [[ilmn]] is selling off today due to a split announcement.  I hate that kind of action.  People sell stocks just because of a non-event.

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Canadian Superior Energy Inc. (USA) [[sng]] just bounced off support today to return to the channel. Probably because of news. Powerful overhead resistance on the double top, so we are looking for more of the hurricane news to draw in some volume to break that.

Entry point/buy limit: $4.10, with stop at 3.90. Play the hype.

52wk Range:	2.43 – 4.95
Volume:	667,338
Avg Vol (3m):	702,538
Market Cap:	588.15M

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