Slope of Hope Blog Posts

Slope initially began as a blog, so this is where most of the website’s content resides. Here we have tens of thousands of posts dating back over a decade. These are listed in reverse chronological order. Click on any category icon below to see posts tagged with that particular subject, or click on a word in the category cloud on the right side of the screen for more specific choices.

Market Neutral Trade for 2.10.2011: Long EMN, Short MBLX

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For today's market neutral trade, I shorted MBLX at $9.12 and bought an equal dollar amount of EMN at $91.37. As I’ve done with the last few market neutral trades, I shared the trade idea with subscribers of the Market Neutral Notification List the night before I placed the trade.

One quick note about my plan here: in a previous post, I mentioned I planned to build up to a portfolio with 26 pairs. I've decided that would be a little unwieldy. Instead, I plan to build up to 13 pairs over the next six months or so, using wide trailing stops, and then start closing out open positions and replacing them with new ones. On to today's trade.

Metabolix, Inc. (Nasdaq: MBLX), a bio-plastics company, caught my eye recently when I saw its chart.

The gap down in that chart in November occured when the company filed a disappointing 3rd quarter 10-Q, in which it reported a loss of 37 cents per share, versus a gain of 41 cents per share in the previous year's 3rd quarter.

Short Screen shows an Altman Z-Score of -0.95 for MBLX. Recall that Z-Scores below 1.81 indicate risk of bankruptcy within two years. Although MBLX has a high current ratio and no long-term debt its negative trailing four quarters EBIT (Earnings Before Interest And Taxes) and its negative retained earnings contribute to its negative Z-score.

Out of curiosity, I also pulled up a stock report on MBLX from MarketGrader Research. MarketGrader's quantitative tool gives a sentiment rating for stocks, that takes into account technical factors as well as earnings guidance and short interest, and a fundamental rating that takes into account cash flow, profitability, and other factors. On a scale of 0-to-10, with 0 being the worst, MarketGrader gives MBLX a sentiment rating of 1.4. On a scale from 0-to-100, with 0 being the worst, MarketGrader gives MBLX an overall grade of 15.3 and a "sell" rating.

For Eastman Chemical Co. (NYSE: EMN), Short Screen shows an Altman Z-Score of 3.2 (scores of 3 and above indicate an absence of financial distress).

MarketGrader Research's tool gives EMN a sentiment rating of 8.6 on its 0-to-10 scale, an overall grade of 66 on its 0-to-100 scale, taking into account the stock's fundamentals, and a "buy" rating .

AAII Sentiment Survey – Week Ending 2/8 (by Ultra Trading)

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The most recent AAII Investor Sentiment shows a continued favor towards the bullish camp.  The % bullish dropped 2.1% to 49.4% but is still above the historic rate of 39%.  The % bearish stayed at 26.9% as in the prior week and is below the historic rate of 30%.   

The charts below indicate that bullish sentiment continues to stay elevated but has not not moved higher with the SPX and based on the historic correlation, SPX appears due for a pullback.





Submitted by Ultra Trading.  If you would like to read more, please visit - Ultra Trading