Two Potential Catalysts for E*Trade This Week

I expect E*Trade Financial (ETFC) stock price to trend into the mid $2 range this week. More upside is likely as investors are betting on two positive numbers to emerge this week :

1) Brokerage numbers for May and

2) Mortgage Loan performance numbers, which have been stabilizing.

Investors have seen ETFC's cash position grow over the past few quarters while its debt is decreasing along with reduced delinquency rates in its higher risk home equity loans.

Together, these two releases could very well propel the stock price. In addition to these numbers, investors anxiously await news regarding Citadel's talks with ETFC.

ETFC largest shareholder Citadel Investment Corp invested $1.75 billion in ETFC for a 20% equity stake back in November, 2007. Citadel is more than likely to be positioning itself to invest more capital in ETFC. The appointment of Kenneth Griffin, Citadel's co-founder, to the board of ETFC is a very positive sign as Citadel knows ETFC's brokerage business is healthy and looks like Citadel believes ETFC is a good bet.

A possible vehicle for such an investment would be the Public Private Investment Plan (PPIP), which would allow Citadel to leverage its investment with a 7 to 1 ratio of insured funds made available through the PPIP legislation.

The chart technicals are now very bullish with not much upside resistance until the $2.52 area and then the $2.90 level which was last tested on the 17th of April this year.

Disclosure: Long ETFC and buying more.

Comments

[helplessobs...:]

With the large short position a significant move up will cause some fireworks. I think ET is a better bet than stock call options at the same price. ET isn't about to expire, but your calls will.

Jun 15 12:26 PM

[sbass99:]

Brilliant analysis!

Jun 17 07:53 AM

[Bassfisher:]

Super nice analysis !!!! Secondary off'ing this am, stock down by
80% from levels you quote while on its way to permanent residence
in the under .50 cents camp.
So much for technicals.

Man, i feel bullish now, dilution is good for shareholders.

Jun 17 08:08 AM