Cheering QCOM Higher And Betting On GLW
In our January 24 report, we spoke of buying the Qualcomm
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Feb 75 — 85 bull-call spread for $3.50. The spread has widened to 4 7/8 on
the bullish earnings report from QCOM as the stock has moved up from 73 to 78
5/8 (11:20 am CST). That took QCOM back above both 200- and 100-day moving
averages and just below the 50-day, which rests at 82 5/8. A 40% return in two
days is awfully attractive, but some bulls on QCOM may want to see if we break
through the 50-day to take profits. Just keep in mind that pigs get fat, but
hogs get slaughtered!
Today, our interest was drawn both to JDS Uniphase
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PowerRating). Both intimately involved in fiber optic, which we believe is not the
emperor’s new clothes, but a quite viable business sector. However, we decided
to focus this report on GLW as relative cheapness made it irresistible.
GLW was hammered despite its report
that earnings were up 100% and were well ahead of estimates. The stock
had just dug itself out of the hole that many tech stocks found themselves in
during the December most investors don’t care to remember.
We think the sell-off back to the December lows created some very attractive
opportunities, especially versus the prices some more fortunate tech stocks have
recovered to. After all, GLW is profitable and even with lowered expectations,
is expected to grow at better than 30%. Someone else must like the
prospects for GLW as they have bought 2000 FEB70 calls and sold 1300 MAY 80
calls.
Many traders like the idea of buying the MAY 55 — 70 bull-call spread for 5
1/4.
That’s paying 9 5/8 for the MAY doubles and selling the MAY 70s for 4 3/8. If
GLW recovers back to where it was just two days ago (Traded 72 3/16 on
Wednesday), that would nearly triple their $5.25 investment, as the spread would
be worth $15 at May expiration.