#$pva

Overall market volumes were quite subdued to start the holiday week. Tech stocks saw the most options volumes as the Nasdaq was a leader.

1.  IBM – Dan discussed the back and forth action in IBM calls in yesterday’s NTT post, as rumors surfaced and then were rejected concerning Carl Icahn’s possible involvement in IBM.  The weekly 165 calls traded nearly 10k on the session.  30 day implied volatility closed the day up about 1 point, to around 14, though that’s still at the low end of the 2 year range.

2.  AAPL – While overall options volumes were much lower, AAPL options volume yesterday was around the 1 month average.  The stock closed at another new all-time high, and calls traded more than 2x as actively as puts.  The weekly 118 calls and the Jan15 120 calls were the most active lines, both trading around 40k.

3.  ADSK – Buyer of 8,000 of the Dec20th 65 calls for 0.60 to open, vs selling 194,000 shares at 61.64.  More of that line traded later in the session, and a total of around 20k of the Dec20th 65 calls traded at an average price of 0.61.  ADSK closed at a new all-time high on Friday after a strong earnings report.

4.  PVA – PVA has been hit hard like most energy stocks in the past 6 months.  However, a bullish trade yesterday, as someone bought the Jan16 10 / 20 1×2 call spread for $1.40 to open, 14,500 x 29,000 times.

5.  HAL – The April 60 calls traded over 23k for an average price of 0.91, mostly buyer initiated.  HAL traded above $60 as recently as early October.  I discussed a possible bullish trade in HAL in April in last week’s NTT post.

6.  UTX – UTX traded large volume after the news of the CEO stepping down, and the stock closed down 1.3% on the day.  The Feb 115 call line was the most active, trading over 22k at an average price of 1.27, mostly buying to open.  UTX last traded above $115 in mid-July.

I’m always intrigued by huge bases, normally a prolong period of contraction leads to a prolong period of expansion., hence the term; the bigger the base the higher into space it goes.  We’ve pointed out a few bases over the last year that have made huge moves after we flagged them.  We pointed out QSII  on 7/10/2013 it ran 18% in a few weeks, PVA  on 7/17/13 at $5 and a few months later at its peak it was up 250%, on 9/13/2013 we highlighted HZNP at $2.75 at its peak 6 months later it was up 481%.  These huge bases don’t show up on a regular basis especially after a long running bull market, but when they do you have stay on top of them because once they emerge from their bases (stage 1 to stage 2) they usually do very well.  

 KCAP has been basing for almost 12 months after a blow up last year.  The base just tells you that the company has a whole new set of stock holders who believe that perhaps last year’s blow up is out of the way and that company greener has pastures ahead (that of course is until the stock breaks-down).  If you look at the chart you will see up and down movement  ($8.50 to $7.80) until recently.  Now what you are seeing is a series of higher lows which tells me that buyers are in control for the first time in 12 months.

Here is the way I would play this; I’m a buyer of stock above the base with a stop at $8.20, if for some reason it becomes a failed break out I would continue to track the stock because these bases tend to be very powerful, and just because it fails the first time it does not mean that it can breakout down the road.  SKUL was flagged on 9/24/13, the initial breakout failed but but 2 months later it was set up again to break above its base and it did which led to a 70% move in 3 months.

KCAP will probably not be a fast or a big mover like PVA, HZNP or SKUL, its more of an income stock with a nice yield, nevertheless you can probably get paid while you wait and that makes it intriguing.  Currently its dividend is 11.72%.

FINVIZ; KCAP Financial, Inc. is a private equity and venture capital firm specializing in mid market, buyouts, and mezzanine investments. It focuses on mature and middle market companies. The firm structures its investments through senior debt, second lien debt, secured and unsecured subordinated debt, mezzanine debt, and equity. It invests in all sectors except cyclical industries. The firm invests equity in both minority and control transactions alongside other equity investors. It invests through its own balance sheet. KCAP Financial, Inc. is based in the New York, New York.

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QSII BASE

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Frank Zorrilla is the founder of Zor Capital LLC a New York based investment management firm.  Our goal is superior performance, with preservation of capital as our number one priority. Zor Capital manages separate accounts (both taxable and retirement) for accredited investors and institutions. This structure gives clients access to a hedge fund like strategy while maintaining 100% control of their accounts.  Managed Assets