Market Overview

This Stock Could Pop Over the Next Couple of Months

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As they say, timing is everything. Many investors feel uncomfortable when a stock pulls back, even if it is a solid, well run company. However, it is during times when the stock is under selling pressure that could be the best opportunity to buy.

Another factor investors should look for is potential catalysts. No stock will move without a catalyst.

What are some catalysts?

The obvious ones include earnings releases, and new product innovations. However, for other companies a potential catalyst could be attending various conferences, spreading word of the company to new investors, fund managers and brokers.

Olin Corporation (NYSE: OLN) is one such company that is about to embark on a month filled with conferences. For those unaware, Olin Corporation operates in three segments; 1) Chlor Alkai Products, producing chlorine and caustic soda, 2) Chemical Distribution, manufacturing bleach products as well as potassium hydroxide, and 3) Winchester, producing ammunition.

During the month of September, the management of Olin will be attending three conferences, on September 10, September 17, and September 25. If one wanted specific information on each conference, it is available at the company's website.

The key takeaway is that this company will be extremely visible over the next month. This is a company that trades with a trailing price-earnings ratio of just 12 times, has a dividend yield of 3.5% and has a relatively large short interest, with approximately 10.1% of the float short.

This type of setup, a well-run company about to increase its level of publicity with a relatively large short interest, could potentially increase its share price over the next few months.

Our firm was not the only one to notice this potential, as we saw a big print of option buying at the $25 strike level. Both the October $25 calls as well as the November $25 calls were actively traded recently, as a large investor continued buying aggressively.

 


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Over the last month, the share price has pulled back to its 200 day moving average. Clearly the option buyer believes this pullback is an opportunistic entry point. Fundamentally, a company issuing such a good dividend yield in this low interest rate environment should be attractive to income oriented investment funds, providing some level support.

Also note that the $25 price point is a crucial resistance level, as the stock has bounced away from this point several times. The option buyer knows how important the $25 level is, and has structured the trade so that if the stock were to exceed that level, it would most likely accelerate from stops being triggered.

Obviously, no one can guarantee that simply because a company attends several conferences that the share price will go up. What we can say is combining this level of publicity, in addition to heavy bullish option trading and a valuation that is quite attractive all combine to make this stock quite interesting at this point.

We don't recommend buying or selling any specific security simply based from this article, we are simply pointing out several interesting coincidences that might make one pay attention to the stock and conduct further due diligence based on their own risk profile.

If you would like to know how we would create a trading strategy using companies like Olin, then check out our Flagship Newsletter or the Aggressive Investor Newsletter. If you would like to know how we would create a trading strategy for ETF's, then check out the ETF Total Return Newsletter.

Or we can teach you in a one-on-one coaching session on how to improve your trading and investing skills.

If you know anyone who thinks that Dividend Stocks are safe, do them a favor and have them read this article on BehindWallStreet.com

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By Joel Laceda - September 3, 2013 BehindWallStreet.com

The following article is from one of our external contributors. It does not represent the opinion of Benzinga and has not been edited.

Posted-In: Markets Trading Ideas

 

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