A One Arm Bandit Trade

Last time I covered an ‘Old Faithful' trade, one that has worked reliably in recent years. Today I'm covering a ‘One Arm Bandit' trade, and it is in a setup right now.

A ‘One Arm Bandit' trade is like a slot machine to me. I don't gamble. But on rare occasion, if I'm walking past a slot machine, why not pause and throw a quarter in? Like buying a lottery ticket once or twice a year or placing a small bet on a long shot in the 4th race at Aqueduct, a small stock purchase or one or two cheap call options will not break me and provides a little amusement.

I was looking over last week's earnings releases to see if there were any post- announcement trade possibilities. With only a few companies announcing so far, there wasn't much to work with.

I've been keeping a watch on restaurant stocks. In the newsletter, we hit a nice 10.5% gain on Brinker International (EAT) recently, and the Yum! Brands (YUM) trade is currently up 7.8%, and we're about to get a dividend payment on top of that.

So when I saw Ruby Tuesday's earnings announcement after the close on Thursday, I investigated, even though their results looked pretty lackluster.

It turns out Ruby Tuesday can't get out of its own way. They did report a smaller net loss than expected, but that was mainly from cost-cutting, not from growth. They've had a new CEO for two years, and he hasn't been able to do anything.

So why would I look any further for a trade possibility? The stock is low-priced, and hasn't gone anywhere for years:

But a couple of odd things stood out. For some reason, a number of insiders have been buying the stock over the past few years.

Most of these insiders have held onto some or all of the shares they purchased. You don't see this very often in this type of company. So are they expecting a turnaround? If so, they must be getting impatient. Are they expecting a buyout? Who knows.

But one other thing jumped out at me. It's not just the insiders that periodically grab some stock. Looking at RT's weekly chart, the stock periodically shows buying spikes, with the price jumping above recent resistance on very high volume. And it turns out another spike may be starting:

The three previous breakouts easy gained at least one point after the breakout. I think the 8.0 level is reachable this time, which would be an 18.3% gain over the current price. An 8% stop-loss would be reasonable to limit losses.

So this is not a serious trade setup that would be part of a methodical income strategy. This is merely a walk-by dropping of a quarter and pulling of an arm trade. But sometimes I just can't pass up a good pattern.

Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day.  To find out more, please click on the following link: www.markettamer.com/seasonal

By Gregg Harris, MarketTamer Chief Technical Strategist

Copyright (C) 2015 Stock & Options Training LLC

Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.

Gregg Harris is the Chief Technical Strategist at MarketTamer.com.

The content on any of Market Tamer websites, products, or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options, and other securities involve risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities are not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options (http://www.optionsclearing.com/publications/risks/riskstoc.pdf). The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.

Be Sociable, Share!

Related Posts

 

MarketTamer is not an investment advisor and is not registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory Authority. Further, owners, employees, agents or representatives of MarketTamer are not acting as investment advisors and might not be registered with the U.S. Securities and Exchange Commission or the Financial Industry Regulatory.


This company makes no representations or warranties concerning the products, practices or procedures of any company or entity mentioned or recommended in this email, and makes no representations or warranties concerning said company or entity’s compliance with applicable laws and regulations, including, but not limited to, regulations promulgated by the SEC or the CFTC. The sender of this email may receive a portion of the proceeds from the sale of any products or services offered by a company or entity mentioned or recommended in this email. The recipient of this email assumes responsibility for conducting its own due diligence on the aforementioned company or entity and assumes full responsibility, and releases the sender from liability, for any purchase or order made from any company or entity mentioned or recommended in this email.


The content on any of MarketTamer websites, products or communication is for educational purposes only. Nothing in its products, services, or communications shall be construed as a solicitation and/or recommendation to buy or sell a security. Trading stocks, options and other securities involves risk. The risk of loss in trading securities can be substantial. The risk involved with trading stocks, options and other securities is not suitable for all investors. Prior to buying or selling an option, an investor must evaluate his/her own personal financial situation and consider all relevant risk factors. See: Characteristics and Risks of Standardized Options. The www.MarketTamer.com educational training program and software services are provided to improve financial understanding.


The information presented in this site is not intended to be used as the sole basis of any investment decisions, nor should it be construed as advice designed to meet the investment needs of any particular investor. Nothing in our research constitutes legal, accounting or tax advice or individually tailored investment advice. Our research is prepared for general circulation and has been prepared without regard to the individual financial circumstances and objectives of persons who receive or obtain access to it. Our research is based on sources that we believe to be reliable. However, we do not make any representation or warranty, expressed or implied, as to the accuracy of our research, the completeness, or correctness or make any guarantee or other promise as to any results that may be obtained from using our research. To the maximum extent permitted by law, neither we, any of our affiliates, nor any other person, shall have any liability whatsoever to any person for any loss or expense, whether direct, indirect, consequential, incidental or otherwise, arising from or relating in any way to any use of or reliance on our research or the information contained therein. Some discussions contain forward looking statements which are based on current expectations and differences can be expected. All of our research, including the estimates, opinions and information contained therein, reflects our judgment as of the publication or other dissemination date of the research and is subject to change without notice. Further, we expressly disclaim any responsibility to update such research. Investing involves substantial risk. Past performance is not a guarantee of future results, and a loss of original capital may occur. No one receiving or accessing our research should make any investment decision without first consulting his or her own personal financial advisor and conducting his or her own research and due diligence, including carefully reviewing any applicable prospectuses, press releases, reports and other public filings of the issuer of any securities being considered. None of the information presented should be construed as an offer to sell or buy any particular security. As always, use your best judgment when investing.