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Revisiting a Recent Observation



January 18, 2012 – Comments (6) | RELATED TICKERS: SHLD

Recently, I detailed the bounce shares that have been hammered precipitously by 60% or more often see in a relief rally. I posited that this price action is the result of shorts getting carried away and overcrowding a trade. They then scramble and cover when the stock finds support.

Sears was one of the few names I mentioned in the analysis. It has rallied another $6 or roughly 20% higher to $39 and change from a few days ago in the $32-$33 range. Did anyone go long the stock or pick up some calls on SHLD? It seems like a tough proposition to be long for any significant period of time with the risk more supplier credit financing could get pulled. My gut tells me Sears will settle out in the low to mid 40's and start to sell off back into the mid 30's over the next month or two barring any disasterous news. Thoughts?

6 Comments – Post Your Own

#1) On January 19, 2012 at 12:41 AM, awallejr (52.41) wrote:

I thought the reason for a bounce back was as a result of a rumor that it might go private.

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#2) On January 19, 2012 at 3:16 AM, thecherryz (84.46) wrote:

I got calls near the bottom.  I sold them around 36.xx yesterday.  It caused a roughly 66% gain in my total port.  =).

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#3) On January 19, 2012 at 3:17 AM, thecherryz (84.46) wrote:

Would have a lot more if i still had them here around 39.xx heh... =/

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#4) On January 19, 2012 at 11:48 AM, RallyCry (30.23) wrote:

I think that Sears is unlikely to go private if only for the liquidity that trading on a public market gives Lampert. He loves share buybacks and I imagine this process would be much less efficient in a private equity structure. I could be wrong here. I also think the public market put a premium on his positions since he has a pretty impressive track record of success. Also I think if you asked him, he would suggest Sears Holdings is only in inning 1 or 2 of what he has planned for it long term. He is betting heavily on a turn around in consumer spending and real estate. Time will tell.

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#5) On January 20, 2012 at 6:13 PM, RallyCry (30.23) wrote:

SHLD stands at $49.00 as of Friday's close. 40% above the $30 range it nose-dived down to. What a bounce!

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#6) On January 20, 2012 at 6:14 PM, RallyCry (30.23) wrote:

Thats not even right. SHLD is 63% higher!

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