NEW BULLISH Plays
PetMed Express Inc. - PETS - close: 10.25 change: +0.13
Stop Loss: 9.90
Current Gain/Loss: unopened
Time Frame: 6 to 8 weeks
New Positions: Yes, see below
Why We Like It:
High-dividend stocks are pretty popular these days. PETS has an annual yield of 4.9%. Yet there are plenty of investors who are bearish on the stock. Short interest is almost 29% of the very small 19.8 million-share float. PETS does not have a good history of hitting Wall Street's earnings estimates. Looking over the last several quarters the company tends to miss. That helps explain the big drop from $24 in early 2010 to $9.00 late this year.
If you're bullish on PETS then the good news is that shares appear to have formed a bottom with the lows this fall and in late November. You could argue this is a double bottom for PETS. If shares can gain any momentum then shorts may start to cover and that could produce a short squeeze.
PETS has potential technical resistance at the simple 150-dma at $10.35. I am suggesting a trigger to open bullish positions at $10.45. We'll use a stop loss under today's low. I would keep our position size small to limit our risk. The simple and exponential 200-dma could be significant overhead resistance and PETS struggled with resistance near $11.50 in the past.
NOTE: I would prefer to trade the stock over the options but we're listing the options as an alternative.
Trigger @ 10.45 (small positions)
Suggested Position: buy PETS stock @ $10.45
- or -
buy the Feb $10 call (PETS1218B10) ask $0.70
Entry on December xx at $ xx.xx
Earnings Date 01/24/12 (unconfirmed)
Average Daily Volume = 231 thousand
Listed on December 27, 2011