NEW BULLISH Plays
Globe Specialty Metals, Inc. - GSM - close: 24.90 change: +1.30
Stop Loss: 23.40
Target(s): 27.25, 29.50
Current Gain/Loss: + 0.0%
Time Frame: 6 to 8 weeks
New Positions: Yes, see below
Why We Like It:
Economic data that China's GDP came in at +9.5% from a year ago helped ignite the rally for commodity-related trades. A weak dollar threw fuel on the fire. If China has successfully engineered a soft landing for its economy then the country's demand for industrial metals and commodities could start to ramp up again.
Shares of GSM had been consolidating sideways near resistance at $24.00. The rally this morning produced a surge to $25.67. Even with the pull back off its intraday highs GSM still closed up +5.5%.
Now I almost always avoid chasing a move like this. A +5% move in one day is a bit much. However, the combination of China's news and a breakout to new highs is too tempting. Nimble traders could wait and try and launch positions on a dip near $24.00 or a dip near the simple 10-dma. I am suggesting we go ahead and buy this stock now. However, we do NOT want to launch positions if the S&P 500 opens in the red tomorrow.
We should consider this an aggressive, higher-risk trade so let's keep our position size small to limit risk. We can always add to positions down the road.
FYI: The Point & Figure chart for GSM is bullish with a $28.50 target.
- Open SMALL positions -
Suggested Position: buy GMS stock @ current levels
- or -
buy the AUG $25 call (GSM1120H25) current ask $1.50
Entry on July 14 at $ xx.xx if S&P 500 is positive
Earnings Date 09/15/11 (unconfirmed)
Average Daily Volume = 874 thousand
Listed on July 13, 2011