The Money Tree

Safely Generating Income in Retirement

VISIONS Scan – Potential Trades

Posted by mounddweller on March 26, 2011

Fellow Traders,

Earlier this afternoon I ran SCOUT in VISIONS to see if I could unearth any interesting NP trades for the 3 weeks remaining before APR expiration.  17 stocks met Ron’s Level 4 selection criteria.  The “Top 10” were BBBB, AKAM, STP, STRA, LPL, ARO, CELG, ICLR, UMPQ, and CEPH.  Out of the “Top 10” I felt AKAM, STP, LPL, ARO, and CEPH were worth digging into deeper.

My objective in running the scan was to find stocks trading in Ron’s VISION V with APR puts that met the following criteria:

(1) Strike price at or less than recent lows, and

(2)  Premium that provided an annualized ROIC > 15%.

In the first chart below you can see that LPL was the only stock that met both of my criteria.  However, you’ll also notice it has < 4% DSP.  I didn’t like that so I decided to explore a little further and see how much I had to increase the strike price to attain my desired minimum ROIC.  The results of that analysis can be found in the second chart.  By relaxing my first criteria I was able to identify three trades that I felt might be a reasonable trade.  These are highlighted in green. 

Of these three ‘finalists’ I think CEPH is the best bet.  Looking at its price chart over a 1, 2, and 5 year period reveals that it has strong support around the $55 level.  STP and AKAM do not have strong support at my chosen strike prices.  STP has some support at $7 but as we saw earlier there is no premium at that strike.  Looking at the 1, 2, and 5 charts for AKAM reveals a very scary situation in that it hit lows of around $10 back in 2009. 

Here is the VISIONS 1-year price chart for CEPH.  I would also encourage you to go to Yahoo or another site where you can see the 5-year chart to see the strong support at the $55 price point.

Check these stocks out and let me know what you think about my selection criteria and my process of elimination.

Regards,

Troy

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