NEW BEARISH Plays
Pacific Ethanol, Inc. - PEIX - close: 13.68 change: -1.92
Stop Loss: 15.10
Current Gain/Loss: unopened
Entry on May -- at $--.--
Listed on May 01, 2014
Time Frame: 6 to 8 weeks
Average Daily Volume = 2.2 million
New Positions: Yes, see below
Why We Like It:
PEIX is in the basic materials sector. The company makes ethanol.
I am labeling this an aggressive trade due to the stock's volatility. Shares soared from their November 2013 lows to under $3 a share to trade above $18 just a few weeks ago. The rally got a bit boost in late February when PEIX delivered better than expected earnings results. Combine that with a high amount of short interest and PEIX surged on short covering.
Unfortunately for shareholders the technical picture for PEIX has changed. The two peaks in March and April this year looks like a bearish double top. PEIX has been stuck churning sideways in the $13.50-16.00 zone for the last four weeks. Recent weakness has produced a new sell signal on its point & figure chart now that forecasts a $10.50 target.
Today's big drop (-12.3%) was a reaction to earnings where PEIX missed estimates. I suspect shares might correct lower toward the $10.00 region. There are already a lot of shorts in this name with the latest data listing short interest at 17.7% of the very small 17.4 million share float.
Tonight I am suggesting small bearish positions if PEIX trades below $13.25. If it hits our trigger then we will aim for $10.25. We'll try and limit our risk with a stop loss at $15.10. This should be considered an aggressive, higher-risk trade. You may want to use the put options to limit your risk.
Trigger @ 13.25 *small positions*
Suggested Position: short PEIX stock @ (trigger)
- (or for more adventurous traders, try this option) -
Buy the Jun $12.50 PUT (PEIX1421R12.5) current ask $1.20