Thursday July 19, 2012
by Bernie Schaeffer, editor Schaeffer's Investment Research
Our proprietary investment strategy -- known as Expectational Analysis -- combines three factors: technicals, fundamentals and contrarian-based sentiment indicators.
Based on this approach, I have taken two new positions in our Master Trading Portfolio -- a long position in Linkedin Corp. (LNKD) and a short position in OpenTable (OPEN).
On the long side, Linkedin has shown strong price action year-to-date and is up 62 percent. Over the past 6 months, LNKD is up 47 percent.
On the sentiment front, the Schaeffer's open interest put/call ratio (SOIR), which looks at the front three months' open interest, is currently at 1.18. An unwinding of these options could act as a tailwind toward LNKD.
Additionally, short interest as a percentage of the stocks float is at nearly 8 percent. Any strength by LNKD could cause an unwinding of these bearish bets and drive the shares even higher.
Finally, of the analysts covering the stock, 11 of the 20 analysts have it rated as a hold, leaving room for further upgrades that could then drive the shares even higher.
On the short side, price action for OpenTable has been weak, with the equity down 50 percent over the past year.
On the sentiment front, the Schaeffer's open interest put/call ratio (SOIR), which looks at the front three months' open interest, is currently at 0.70.
This ratio also ranks in the 28th percentile of all ratios in the past 52 weeks and indicates a relatively high number of bullish bets on the equity. An unwinding of these options could act as a headwind toward LNKD.
Downgrades are a definite possibility in the future, as several analysts currently have it rated as a buy or a strong buy. This could help to drive the shares down even further.
Learn more about this financial newsletter at Bernie Schaeffer, editor Schaeffer's Investment Research.