LINE - Super Stock in Play


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LINE - High Publicity Stock with SEC Investigation

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LINE - Super Stock in Play

  1. 1. Super Stock In Play - High Publicity Stock with SEC Investigation Day 1 - Large Gap, Lower highs holding below VWAP, *Consolidation at the lows Day 2 - *2nd Day Play, *Hold Below Day 1 Lows Day 3 - Day 3 Drive, *Uptick Rule Reversal * Indicates Best Play of the Day Alan Williams Ticker: LINE Dates: 07/02/2013, 07/03/2013, 07/05/2013 *July 4th Holiday*
  2. 2. SMB TRAINING is NOT a Broker Dealer. SMB Training engages in trader education and training. SMB TRAINING offers a number of products and services, both electronical (over the internet through and in person. SMB TRAINING also offers web-based, interactive training courses on demand. The seminars given by SMB TRAINING are for educational purposes only. This information neither is, nor should be construed, as an offer, or a solicitation of an offer, to buy or sell securities. You shall be fully responsible for any investment decision you make, and such decisions will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs. This material is being provided to you for educational purposes only. No information presented constitutes a recommendation by SMB TRAINING or its affiliates to buy, sell or hold any security, financial product or instrument discussed therein or to engage in any specific investment strategy. The content neither is, nor should be construed as, an offer, or a solicitation of an offer, to buy, sell, or hold any securities. You are fully responsible for any investment decisions you make. Such decisions should be based solely on your evaluation of your financial circumstances. Such decisions should be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance and liquidity needs. SMB Training and SMB Capital Management, LLC are separate but affiliated companies. No relevant positions Please note: Hypothetical computer simulated performance results are believed to be accurately presented. However, they are not guaranteed as to accuracy or completeness and are subject to change without any notice. Hypothetical or simulated performance results have certain inherent limitations. Unlike an actual performance record, simulated results do not represent actual trading. Since, also, the trades have not actually been executed; the results may have been under or over compensated for the impact, if any, of certain market factors such as liquidity, slippage and commissions. Simulated trading programs in general are also subject to the fact that they are designed with the benefit of hindsight. No representation is being made that any portfolio will, or is likely to achieve profits or losses similar to those shown. All investments and trades carry risks.”
  3. 3. SPY The SPY has been range bound recently.
  4. 4. Linn Energy, LLC, an independent oil and natural gas company, engages in the acquisition and development of oil and natural gas properties. The company’ s properties are located in the Mid-Continent, the Hugoton basin, the Green River basin, the Permian basin, Michigan, Illinois, the Williston/Powder River basin, California, and East Texas in the United States. Average Daily Volume: 3.25 Million Average Trading Range: 1.78 FS%: 5.5% Insert Co. Image
  5. 5. Intraday Fundamentals Day 1 News: Wall Street Generally Sells First and Asks Questions Later. An SEC Investigation is one of those times to sell first. Tuesday, July 2, 7:49 AM Linn Energy (LINE) -9.9% premarket after saying the SEC has opened an informal inquiry into its financial disclosures and its pending merger with Berry Petroleum, its use of non-GAAP financial measures relayed to investors and its hedging strategy. The SEC action comes amid scrutiny from financial media and research firms into the driller's financial health. LNCO -12.3%, BRY -6.8% Tuesday, July 2, 12:34 PM Linn Energy (LINE -14.4%) and LinnCo (LNCO -12.2%) are downgraded by at least three firms following the disclosure of the informal SEC inquiry. J.P. Morgan expects significant volatility in LINE until the SEC inquiry is resolved and the impact on the Berry (BRY -5.2%) transaction is known. Howard Weil thinks the SEC could wind up forcing LINN to restate non-GAAP discretionary cash flow ( Day 2 News: Wednesday, July 3, 10:37 AM It's shaping up as another difficult day for Linn Energy (LINE -9.3%) and LinnCo (LNCO -8%) after yesterday's selloff. After a round of downgrades, Stifel Nicolaus today cut its price target on both to $33 from $48. Selling the put portfolio would not be a wise option, the firm says; Linn would shed some controversy but sacrifice possible future cash flow. Baird cautions broadly on upstream MLPs; BBEP -9%, ARP -7.1%, VNR -6.3%, QRE -6.2%, EVEP -3.2%.
  6. 6. Big Picture The daily chart shows that support has been broken prior to this announcement. Also already trading near 2 Year Lows. This stock has been very publicized lately with several well known hedge funds involved as well as Cramer talking about it.
  7. 7. Day 1- Intraday Technical Analysis Intraday Chart Annotated
  8. 8. This stock is gapping down from $33 on news of an SEC investigation. This is the type of news that will cause something to close at the lows of the day. 1) Depending on liquidity look to get involved PM when it can't get above a certain price. This stocks ATR is > 1 so you could see 2-3 points of a move today. Give it enough room and don't be afraid to put on the risk. 2) On the open it can not pop through the PM resistance - Get Short. You can kick off half into the quick drop. Remember this should move today so you have to be ready to add back. 3) After it pops back up it starts to drift downward and establishes lower highs. Finally gets below and holds below VWAP - get bigger. Give it a chance to make new lows but when it doesn't it's a failed breakdown so take half off at previous lows and look to add back. 4) Once again makes a lower high and holds below VWAP - add back what you took off at the lows. 5) 35 Minutes of tight consolidation at the lows. You HAVE to put on size here. This should be A+ play risk. Add at the top of the tight consolidation and Pay the break of the new lows too. Kick out into steep move and volume peak. 6) Can't really bounce much after a steep move and it has the uptick rule. Sellers are in control. Add back what you took off at resistance and on trendline break. 7) Lower highs - Add more at 27.50 resistance and trendline break for the close at the low. Hard to judge how far this could go. $27 would be 3 points from the open and 3 times the ATR. It should close at the lows and can keep core overnight. Day 1- Intraday Technical Analysis
  9. 9. Day 2- Intraday Technical Analysis This is the 1 Minute chart of the open zoomed in. Opening Drive lower and holds at the lows giving you time to add at point 2.
  10. 10. 1) It doesn't gap down much and opens near where it closed. This point is the previous day's' low. Can play momentum through this level. 2) Opening drive lower and holds at lows. Add size. See enlarged section for 1 minute chart. 3) Holding lower. Look to add. 4) $24.50 offers clear resistance. Add here against the level on trendline break. If you take off on failure to make new lows look to add on the break of that level. 5) Retest of the breakdown level. Add size here. Again we don't know where this could end the day. $23 is a 4 point move and 4 times the ATR. It should close at the lows of the day. **This day ended at 1PM due to 4th of July Holiday.** Day 2- Intraday Technical Analysis
  11. 11. Day 3- Intraday Technical Analysis
  12. 12. Day 3 is Potential Uptick Rule Reversal. Prefer to see one final push lower on the open and then consolidation above VWAP. 1) Gaps up slighlty to prior breakdown level from Day 2. Can look to play against this level for the Day 3 Opening Drive. 2) Low Risk PM Play. Get involved here. Again looking for the third day final woosh on the open. 3) If you have any position remaining you are out on this pop higher and definitely above VWAP. 4) 30 Minutes consolidation above VWAP is our Uptick Rule Reversal Entry. The high of the day is 2 points away and it is down a lot. Willing to risk .40 for 5:1 RvR. Can also pay the break of this consolidation high.Kick out some to cover risk into #2 PM Level. 5) Finds some support and makes a higher low. Look to add. 6) Better add than #5 with lower risk. Look to take off half on momentum through PM high. If it struggles at PM high take off half. The rest is playing with houses money. Keep stops tight. 7) Hold above 24 and PM High - add. Kick out into 25 as nearly a 4 point move. Day 3- Intraday Technical Analysis