Wednesday, January 11, 2006

FFIV Force Five

An interesting trading day in FFIV today. There was an overnight profit warning coming from a Lehman analyst, who gave a price target of $50, causing the stock to gap down on extremely high volume.

Now my take on this is that it is not based on any official information from the company. Two previous analysts have raised their price targets in the past 2 weeks. This particular downgrade appears to be based on surveys. It's possible this is a legit downgrade. On the other hand, its also quite possible that this is some type of monkey business, and also possible that this analyst's info is downright wrong.

The opportunity I see here is that one person moved the market downwards by over 8% in a single day. One of two things will happen. 1) he is right and the stock will drop like a stone at some point earnings release is on 1/19. 2) The majority of the analysts are right and someone will make a nice profit on this.

I am in this one. If 1) - I have some time to trade out, and from a technical standpoint there is a clean gap that has a good chance of being at least partially filled. If 2) I'll be feeling pretty good.

On the downside, I don't like the way the stock dropped in the last 3o minutes of trading and there is also the possibility of another analyst downgrade serving as a negative catalyst to drive it further down.

We'll see.

EndoPharma would have been a nice trade.


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