IBKR Earnings

The time has come for IBKR to show wallstreet that they are worthy and why anyone should care. Only three weeks after Interactive Brokers went public they will be releasing earnings at the market close tomorrow (Tuesday 5/29). As many investors and traders know, the first earnings report is crucial for the early success of an IPO. I think it is a very bullish sign that IBKR will be coming out with their announcement so quickly after going public and check out the page they set up for the report and conference call. They know what is at stake here and IBKR appears poised to wow.
The chart is starting to take shape (maybe a diamond bottom?) and some of the technical indicators are coming into existence. The RSI below 20 suggests IBKR is extremely oversold, the slow stochastic just gave a buy signal, the 10 day moving average just turned up and the price action looks healthy. IBKR appears to have solid support around $26 but it really all depends on earnings. I like the June 30 calls ahead of earnings because they aren't too expensive with an implied volatility around 40% and buying the stock doesn't seem like a bad idea either.

As my regular readers know well, IBKR invokes thoughts of another stock I can't seem to ever get off my mind. And like IBKR this stock seems to have a low risk entry as of Friday's close:
After a solid breakout on rising volume ICE has pulled back to support near 140. The chart is starting to look like a healthy cup n' handle continuation so I like this pullback as an opportunity to go long or add ICE. I would be happy buying ICE between $140 and $145 if there is an opportunity but my stop would be set at 139.99, in other words it better not go there. I think the previous high is reasonable in 2-3 months but lets get past 153.36 first. By the way, the implied volatility on ICE options has really retreated, they are the cheapest they have been in months...

Semi Shorts and a RIMM Breakout

I'm gonna try to make this week's post short and simple. All three of these stocks will trade with the nasdaq to a large extent. In the event of a strong QQQQ (nasdaq), RIMM just broke out of a long term consolidation. The weekly chart below suggests that RIMM is in the early stages of a big move upwards:
By the way, RIMM is 35 in the ibd 100 and investors business daily (ibd) just recommended RIMM as a buy.

The semiconductor stocks have been struggling for months but recently broke out. I think this breakout may fail as the sector has some real fundamental problems, mainly oversupply. VSEA is probably the strongest semiconductor stock right now and number 28 in the ibd 100. However, it recently rolled off a peak to below the midpoint of its bollinger bands (see below) which has spelled doom for the stock in the past (an many other stocks). I would keep a tight stop on the stock, but expect it to hit the first and possibly the second of the two targets seen in the chart below, especially in the case that the QQQQ sells off:

No matter what the nasdaq does WFR looks finished. I am going to try and stay away from the fundamentals as reasons to trade from now on, but lets just say that the polysilicon seller is running into a major oversupply of their product in 2008, not good. I already suggested WFR might be a short, but now that it is working I think it is a great example of what is going on in the the semiconductor sector. WFR appears to have just completed a long term reversal:
WFR is now 74 in the ibd 100, a dramatic fall from the top ten recently.

Disclosure: I own WFR June 55 puts.
Note: You are responsible for your own investment decisions, this is in no way intended to be a recommendation.

A few nice charts and... IBKR

Looking over various stocks that I try to keep an eye on tonight, I've seen a couple really great looking charts. The commodity exchanges for example, look pretty solid, eg. ICE, BOT, CME.
Above I have what appears to be CME doing a reversal. It previously broke down out of a long term symetric triangle which led it into death spiral, the bull seemed dead. But after Friday's move CMEs chart looks fantastic, I like everything about the story the action and the options. ICE looks great too.

Another one I like it HYTM, which appears to be in the early stages of a ~36 week cycle. In the weekly chart below you can see a clear pattern in which HYTM makes a major low about every 36 weeks. In the past this low is followed by a powerful upside swing to the approximately the upper bollinger band which currently lies around $10. This is a long term move, but in the past the initial stage was the fastest. I will be prepared for some big swing or else set tight stops. They reported earnings last week.

My initial concerns about the IBKR ipo being over supplied and over priced turned out to be true. All of those that bought the ipo at 30 and those buyers since from 33 to 27.50 can't be happy. They doubled the size of the offering and the price went higher, it was pretty counter intuitive and now we see the consequences unfolding in the open market. Who knows how far IBKR will fall, but it has definitely picked up some downwards momentum:
My guess is that IBKR will at least test the middle of the initially suggested ipo price range. When I was informed by IB about the auction they said the expected range was $22.50-27.50 so I put in a bid at $25 which never got filled since it finalized at $30 and opened at $33 on the first day. There is very little to go on in expecting a support level, obviously there isn't much chart history, but I think we should be expecting it to bounce just was fast as it has dropped. One thing is for sure, IBKR is extremely over sold right now.

Disclosure: I own May HYTM 7.50 Calls

IBKR is Born (Interactive Brokers IPO)

I normally like to annotate charts but this 10 month ICE daily above is a piece of art. After some consolidation and a healthy pullback this stock looks poised to blast higher. As the long time readers know I have a fascination with ICE and it has been interesting to watch it grow into being an extremely well behaved trading stock. But tonight I wanted to bring it up as an example of what a great IPO can do in the early years.

After a bullish yet erratic initial six months following the IPO (which happened to be on the day before my birthday, Nov 2005) the chart began to take shape. On the weekly below you can see how the stock has been able to develop a more clearly defined trend and pick up momentum. Also note how the volume has increased while the weekly candles have become smaller(less volatility). Just click on the chart below:

From a fundamental standpoint the Intercontinental Exchange and Interactive Brokers don't have all that much in common They are both in the business of options, a rapidly growing investment vehicle, however ICE is a commodity contract exchange while IBKR is an online equities broker. Their IPOs were somewhat different too, ICE offered up only 16 M shares and jumped substantially from the open on its first day of trading, although it closed far from the high of the day. IBKR on the other hand:

"The automated global options market maker and broker, rose 4% to 31.30 after hitting 34.25 intraday. Interactive Brokers raised $1.18 bil in its IPO, the biggest so far in '07. The offering was first planned for 20 mil shares at $23-$27 each. But Interactive Brokers (NasdaqGS:IBKR - News) ended up selling 40 mil shares at $30.01 each, at the high end of its revised range." -ibd

I use Interactive Brokers and aside from a few minor complaints I am pleased with them. They have a great trading interface which is software based and enables programmed trading without too much effort. As a broker they are great because they have very low commissions and I can chat with technical support with little delay about any sort of problem. What really makes me really bullish on the stock (after it finds support) is the fact that they only do 20% of the US options volume. With their platform so much more advanced for automated options trading I could see this market share increase dramatically and further the US options market is growing anyways. They have a great mission statement:

"Create technology to provide liquidity on better terms. Compete on price, speed, size, diversity of global products and advanced trading tools."
You can read more about Interactive Brokers here, its really a great story.

At any rate, they sold a ton of shares in a auction offering. So for now I would guess it needs to find some sort of equilibrium before beginning a good run, but you never know with IPOs. You can bet I will be watching this one, hoping to get some cheap shares soon and eagerly awaiting options on IBKR. The first day of a beautiful thing?:
By the way, all this new supply of online brokerage shares makes me want to short the other, lower quality brokers, ie. Ameritrade (AMTD). I guess that stock is trying to run on pin action or something, but I'm itching to buy some puts. I'll tell you about my experience with Ameritrade on another day, but most people know what I'm talking about.