Wednesday, September 16, 2009

During the last week of August, Energy Conversion Devices (ENER) missed on quarterly earnings, issued downside guidance for the next quarter, and was downgraded. As a result, the stock had several consecutive down days leading into September. This is another name with a significant short interest (approximately 31%). On 9/8/09, ENER had some upside news and we were able to take advantage of the change in character.

During the morning trade, ENER was in a tight 10 cent range with weak volume. At 9:22 CST, heavy buying came in and ENER sprung to live. Seeing the volume spike and the one-minute bar closing on its high, several traders got long at 9:23 CST. A minute later, released takeover chatter (top left below-click image to enlarge). The underlying stock did not maintain the high volume, but the implied volatility of heavy call volume and a high short interest made the options attractive as the stock chopped for a few minutes. As the stock chugged up for the next 10 minutes, our traders scaled out and locked in profits (see Trading RM Real-Time chat at top right below).

ENER provided a second opportunity around noon. When Najarian highlighted the company on CNBC, the volume spiked again and the stock made session highs. As shown in the Trading RM Real-Time blast (bottom right), our traders saw the surge in buying around noon CST and took advantage of the $0.30 Najarian pop.

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