SKUL has been doing alright; only up 10.1083% since earnings on Thursday and it might be setting up to breakout, but a lot of resistance are at the pre-breakout levels. Be that as it may, there are still around 10-11M shares short this stock with an avg analyst target price of $22. So let’s take a look at the anatomy of SKULnation.

I like how it broke out from the descending trendline with strong volume; this makes it a tasty swing trade set up for me. I also drew a fib retracement level (not a professional, so if you know how to draw it better than me, plz let me know) to make potential resistance and support.

Today was an OK day but not strong enough because the bears are still defending pre-breakout levels– too much supply:

I took this screen cap at EOD and this was the most volume that would not let the bids pass, and I posted a picture earlier showing that .25-.30 had huge resistance. 

Now we take a look at the options contract:

The calls just keep on going up since earnings with strong volume each day;  I think it will get more volatile when the options start to expire in two weeks.

I think if the bulls really WANT that short-squeeze, they might need to need to step it up and take out the supply by hitting the ask to keep pushing this stock higher b/c otherwise, it could lose the upside momentum and start to stall and get stuck in a channel doing some sideways trading ’till the next earnings.

Stocktwits usually doesn’t do this, but they gave SKUL a shout out today:

Nice rally for Skullcandy today and its ticker is starting to trend on StockTwits: stks.co/h3Gp $SKUL

— Stocktwits (@StockTwits) August 6, 2012

Now that more people will know about SKUL b/c it is trending on social media, and crazy bat shit things can happen  just like the Fake Tweets about Syrian president Assad’s death cause all too real spike in crude and s&p.

I am sure a lot of you have heard about $SKUL’s crazy short interest; if not, here are some info about SKULnation.

• has 11.6M shares short giving this stock a 72.11% short interest — that’s significant!
• Mean analyst target price of $23.18; low $17 and highs at $33.
• Average volume of 460K
• has beaten earnings estimates each quarter

Just moments ago, I just found out that 4 directors of the company exercised their options for shares on Monday, June 30th; I am not sure if this is legal for the directors to exercise their contracts to get stock right before earnings, but I guess it is fine considering that their lawyer signed off on it?

• Directors

1. Alden Rick
2. Kearl Jeff
3. Olivit D Scott
4. Warnock Greg

Each of them exercised options for 6,319 shares; that’s a total of 25,726. If Skullcandy beats earnings tomorrow, it could create a HUGE short-squeeze, and if it hits the mean target price of $23.18 tomorrow, each of the directors would earn a nice juicy bonus of $54,532.97. To be honest, this looks super sketchy; c’mon, are directors really allowed to do this? I am expecting them to beat earnings estimates now because they exercised it and I have not gotten an email from their investor relations department (from signing up on their website) informing me about a form 4 filing. Exercising an option should be a T+3 day settlement; what that means is that the option gets exercised on trade date, and gets settled 3 days after; so they get their shares tomorrow right before earnings.

I do not see why they would exercise options if earnings are going to be horrible tomorrow and they are not going to beat estimates. Even if they were forced to exercise options, why would a sane person without insider information exercise it a few days before earnings just to risk not making money or as much money as they can? Would someone really want to risk their bonus this year by exercising their options going into earnings blindly? I do not know about you guys but earnings season has sucked, so I would definitely not. And if it was one director exercising their options going into earnings, I would have thought that he/she is a ‘tard because that is gambling for a huge bonus this year, but it is not; there are 4 directors that are doing it.

Does this seems like insider trading, or is just a way to get around by exercising options and not announcing it to the public? Seriously, are they really allowed to exercise options a few days before so they can earn free money? I guess so. Be that as it may, they can sell those shares any time they want tomorrow but I doubt it since they get shares tomorrow; that would defeat the purpose of exercising the options T+3 before earnings — my opinion.

Be that as it may, let’s take a look at something else that is more interesting than speculating if they(directors) are violating SEC insider trading rules; let’s look at options volume.

Taking a look at the call options, people are buying up to play earnings or maybe shorts are buying it to hedge their short positions; if not, that would be pretty stupid considering the potential for a huge short squeeze. Puts have volume too but just not as much as the calls, but hey, there are always two sides to this game.

Another skeptical I article I read in a Yahoo forum that hasn’t been confirmed yet is a Morgan Stanley analyst report that came out the day before earnings?

Wednesday, August 1, 2012 — 12:37 PM ET

Morgan Stanley was out with some channel check data for Recommended List selection Skullcandy yesterday.

Analyst Jay Sole noted five positives from store checks, writing: “1) We believe SKUL 2Q RadioShack sales improved from 1Q, corroborating RSH management 2Q earnings call commentary; 2) Maintained positioning at Best Buy with improved traction on $299 ‘Mix Master’ product; 3) Ongoing leadership at Target with strong sales of the new, higher priced ‘Hesh’ model; 4) Smooth transition to new packaging. 95+% of product observed was in new packaging and unlike 1Q, we observed very little 2Q discounting; 5) Apple store’s newly increased, 50% larger headphone assortment.”

He also noted one negative, adding: “While Apple’s enlarged headphone assortment was a positive, SKUL lost ‘peg’ share. Importantly, we think new product from Monster Cable gained pegs. The separation of Beats Electronics from Monster may have created two competitors out of one. We see Monster making few inroads at TGT, BBY, or RSH, but we are monitoring this direct threat.”

Sole is expecting a largely in-line quarter (he’s 2 cents above the consensus), and that the stock should grind higher. He doesn’t think a small earnings beat will lead to a short squeeze, however. The analyst has an “overweight” rating and $21 price target on the stock. 

BMR Take: Skullcandy still has a huge short interest, as bears continue to believe the company sells a commodity product where brand doesn’t matter. However, if branding can drive the sales of handbags, sneakers, jewelry, and yoga pants, we think it can drive the sales of headphones, which are becoming much more of a fashion accessory among today’s teens and young adults. Meanwhile, the proliferation of media devices (smartphones, tablets, iPods, etc.) is helping fuel headphone growth.

Trading at about 10x the 2013 EPS consensus of $1.44 with a strong balance sheet and projected high-teens growth, we think Skullcandy remains undervalued. However, it’s going to have to continue to successfully execute to eventually shake the shorts. We rate the stock a “Buy” with a $20 target. –via Yahoo forums

If someone could confirm the article above, that’d be great. And if that article is true,  it seems like there is a high probability that earnings are going to be good tomorrow with significant call options, buying volume within the past few days, and insider exercising their contracts right before earnings to get a piece of the action.

UPDATE: the shares given to the directors are restricted ’till the next annual meeting or Jan 2013 “Represents 6,319 Restricted Stock Units (“RSUs”) granted to the Reporting Person on July 30, 2012 under the Issuer’s Amended and Restated 2011 Incentive Award Plan (the “Plan”), which RSUs vest upon the earlier of (1) June 15, 2013 or (2) the next annual meeting at which one or members of the Board of Directors (“Board”) are standing for re-election, subject in either case to the Reporting Person’s continued service on the Board through such date.”

credit goes to 500kmin

I have had $CYS for a few weeks now; I picked up half  a position when it was low $14s and was scared to add on the dip when it was around $13.80s but now I regret not picking it up. I really like their dividends; it’s $2.00 a year or yields 14%. It has been good to me so far and am looking to add when it drops.

Here is the sketchy part, this company keeps selling more shares below par to raise capital and they use that capital to invest into RMBS (residential mortgage backed security)  usually. So far, this company is doing well with debt and has paid me a descent amount. I don’t recommend this  to be in a typical portfolio because you’ll probably get taxed up the ass; so instead, put this guy in an IRA or a ROTH account.

Here is their investment strategy taken from their site:

Our objective is to provide consistent returns to our investors through a combination of dividends and capital appreciation.

We invest in residential mortgage backed securities either issued or guaranteed as to principal and interest by a government agency or a government-sponsored entity, or Agency RMBS, collateralized by either adjustable-rate mortgage loans, or ARMs, with interest rates that reset monthly, hybrid ARMs that typically have a coupon rate that is fixed for an initial period (typically three, five seven or ten years) and thereafter resets at regular intervals, or fixed rate mortgage loans.

Our investment strategy is designed to:

• build an investment portfolio consisting of Agency RMBS that seeks to generate attractive risk-adjusted investment income;
• manage financing, interest and prepayment rate risks;
• capitalize on discrepancies in the relative valuations in the RMBS market;
• manage cash flow so as to provide for regular quarterly distributions to stockholders;
• limit credit risk;
• minimize the impact that changing interest rates have on our net investment income;
• cause us to maintain our qualification as a real estate investment trust, or;
• cause us to remain exempt from the registration requirements of the Investment Company Act of 1940, or the Investment Company Act.

Our income is generated primarily from the net spread, or difference, between the interest income we earn on our investment portfolio and the cost of our borrowings and hedging activities. We believe that the best approach to generating a positive net spread is to manage our liabilities to mirror, as often as possible, the interest rate risks of our investments. To seek to achieve this result, we employ short-term financing in combination with hedging techniques.

 

 

So the only time this stock really dips is when they give out dividends or when they sell more shares to raise capital; that’s when I added last time.

I’ve also invested in $GGP, $HHC but their dividends suck and stock price fluctuates way too much with the market. $CYS keeps pushing forward even though the market is down; fuck Newton’s Universal Law of Gravity!

The market almost squeezed Goldman and Citibank’s short on the SPX Friday — $0.81 from making them cover their short. LOL. Right now the futs are red but if we blow through the covering(1,390) level, I’m going to margin myself up the ass and go long on anything with high beta so I can ride the squeeze for a day trade. But as of now, it looks like we are going to get some healthy correction and pull back from QE hopes.

Trade Update: Recommending short position in the S&P 500

 

We are recommending a short position in the S&P 500 index with a target of 1285 (roughly 5% below current levels) and a stop on a close above 1390. This morning, the Philly Fed print of -16.6, down sequentially and worse than expected, provides further evidence that weakness has extended into June.

 

Although yesterday’s FOMC delivered easing as expected, with a dovish statement, positive risk sentiment ahead of the FOMC had already buoyed markets. And we now think, with incremental US monetary policy on hold, the market will need to confront a deteriorating growth picture near term.

 

The risk to our recommendation is that the data soon reverts to the 2-percent growth path our economists expect, that China growth turns, or that European policy-makers’ rhetoric buoys risk sentiment further from here, with the upcoming end-of-June summit a focal point on this count.

via zerohedge.com

The question now is, will the banks add more to their shorts and try to push the market down faster during this week’s macro week? I think so.

+.69

started a small position in GLD.