Shares of Tyco International (NYSE:TYC) are breaking to multi- year lows as the stock leads the most actively traded with over 43 million shares trading hands. Today's further weakening in Tyco (TCY) comes after reports that Tyco paid $20 million to an outside director and to a charity he controls in return for help in brokering the CIT acquisition last year. The unusual move drew criticism from corporate-governance experts who have advocated more director independence from top management. The payments were reported in Tyco's annual proxy statement filed yesterday.
Tyco Intl. Chart - Daily Interval
Shares of TYC are breaking to multi-year lows dating back to May 23, 2000. I'm going to roll down my retracement to try and give subscribers some levels to perhaps be looking for some type of support.
Tyco Intl. Chart - Rolled down retracement
The recent Enron debacle undoubtedly is coming into play in shares of Tyco. The market has changed and so have various accounting practices. Any hint of something suspicious in accounting or big sums of money going to those with ties to the top is going to have some institutions selling first and asking questions later. Too many got burned on Enron before some of the "bad news" came out. Expect the "Enron effect" to be in play here and for shares of Tyco (TYC) to see continued selling pressure. While the company has said there are not any unusual accounting policies being used, the MARKET doesn't seem to be listening.
Last week, Austin Passamonte was rather bearish the shares of TYC in the market monitor. I was rather "neutral" and outlined a straddle and strangle options strategy on the stock. So far, the puts are the winning trade.