Good Earnings or a Buyout?


In comments I posted to the Seasonal Forecaster website last weekend, I stated “Ann Inc. (ANN), the parent of Ann Taylor and The Loft clothing stores, is apparently in talks with at least two potential buyers. With Ann's recent growth falloff, activist investors are pushing for a sale. The stock recently dropped back to the early 2014 lows around 32.50, but the stock has been showing some speculative buying since late January.”

“ANN will report earnings on March 13th, before the open (and there's always the possibility of an earning pre-announcement/guidance before then). So this stock could be volatile. Still, if anyone wanted to take a chance on a buyout, which seems likely, my suggested approach would be to take a small position now, maybe add to it if strong buying comes in, and protect it with a 12% stop-loss (which at the current price would work out to 31.60, which is just below the recent lows).”

However, the track record of ANN for this time of year offers another possibility:

“The stock has a strong seasonal bias this time of year. Over the next 12 weeks, ANN has averaged a 19.2% gain, with gains in 21 out of 23 years. It has had only 1 down year over the last 19 years, and most of the gains were double-digits. So even without the potential for a sale, institutions have been regular players in this stock this time of year.”

In my comments I did not offer a specific trade setup. I only pointed out that it offers an interesting setup that some readers may be interested in. That changed this week. Wednesday's strong 2.25% gain on volume 4 times average volume shows somebody is taking a chance on either a turnaround or on good news, like a buyout.

When the other above-average volume spikes are considered, this stock is likely being accumulated by institutions, and Wednesday's strong gain suggests they are no longer concerned about incremental purchases that won't affect the price much. It is especially interesting that this type of activity is occurring a week before the company is due to announce earnings.

In today's Seasonal Forecaster newsletter I cover a conservative way to trade this setup.

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 with extensive experience in the financial sector.

Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.

As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.

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