Marco Hickey's  Instablog

In this post is a list of 24 stocks, which have broken out to the upside on big volume. The stocks listed in this post have experienced very unusual volume. I believe stocks which have broken out like this are at least worth adding to the watch list. However I must say the technicals on these stocks are not as bullish as they've been in the previous weeks, which may be a hint that a short term correction is near. If the market continues to rally however, these stocks should continue demonstrate strength in my opinion.

As stated at the bottom of this post, I've picked two stocks from the list which I may be speculating with in the weeks to come. A month ago I chose to speculate with STEC Inc. (STEC) using call options. The results from the trade can be read here. A couple weeks ago, I chose to speculate with a stock LaserCard (LCRD). The results from that trade can be read here.

Some of these stocks will sell off, and some will continue to move higher, it is important to use caution when purchasing and use discipline when selling.

All of these stocks have had moves higher on huge volume (% volume increase compare to 50 day average).

Data as of market close August 7 2009. The stocks which I'll be watching for the week of August 10, 2009 are listed in the table below.

Company	Ticker	Price Change	Volume Change
Trimas Corp	TRS	6.18%	1565.95%
Emmis Comm Corp Cl A	EMMS	41.03%	1018.71%
Treehouse Foods Inc	THS	12.68%	780.32%
Knot Inc	KNOT	19.09%	752.11%
Quanex Building Products	NX	12.69%	501.71%
Nabi Biopharmaceuticals	NABI	19.37%	490.82%
Apollo Investment Corp	AINV	21.43%	441.03%
C B S Corp Cl B	CBS	26.58%	388.55%
U C B H Holdings Inc	UCBH	15.94%	315.53%
Media General Inc Cl A	MEG	31.25%	297.13%
Brooks Automation	BRKS	18.54%	284.76%
Cogent Comm Group Inc	CCOI	22.09%	266.31%
Liberty Media Int Cl A	LINTA	12.94%	264.15%
Belo Corporation	BLC	11.33%	248.80%
Exide Technologies	XIDE	9.67%	178.98%
Aircastle Ltd	AYR	23.30%	171.50%
Assured Guaranty Ltd	AGO	2.69%	170.86%
Cathay General Bancorp	CATY	13.16%	166.87%
Foster Wheeler A G	FWLT	9.08%	129.73%
King Pharmaceuticals	KG	7.24%	127.17%
Sanmina-Sci Corp	SANM	16.44%	121.72%
Parametric Tech Corp	PMTC	4.65%	90.18%
Brigham Exploration Co	BEXP	11.03%	66.61%
Opexa Therapeutics Inc	OPXA	326.75%	12604.82%

The majority of these stocks are up big on earnings announcements, therefore it is ideal to wait for some kind of a pull back. The stocks which are most attractive to me are TreeHouse Foods (THS), and King Pharmaceuticals (KG).

The Trade:

TreeHouse Foods Trade: I believe TreeHouse Foods is a buy judging by the quarter they just had, they still have a lot of shares short looming. The short interest as of July 31, 2009 was almost 19% and it popped on short covering, but there are still plenty of short shares out there. If it starts to pull back additional shorts should cover causing the stock to stay pretty stable, therefore the trade I am using is the Buy/Write option strategy. I'm looking to get into this stock for around $35 a share. If I can purchase it near that price and implied volatility [IV] is increasing I'll likely choose to write it our for a near term (September) $35 strike. Pocketing the premium should give me roughly a 6%-10% profit assuming it is assigned at options expiration. If IV is declining I'll likely wait to purchase the underlying stock until the options experience an increase in IV (as the option premiums will soar with greater IV). In both cases, as IV falls I'll look to purchase the option back and sell the underlying stock if profitable, if not I'll simply wait for another spike in IV and write the stock out again (this will continue until I am called out or decide to sell the underlying).

King Pharmaceuticals Trade: They reported Thursday, and the stock continued to demonstrate strength during Friday's trade. The stock has very strong technicals and looks like it can keep going, but I wouldn't be too sure so I'm not jumping in with a lot of money. I've decided I'm going to all out speculate, and purchase the September 10 call options on the next pull back (if we get one soon). The current options market is factoring in a $15 decrease per contract for each quarter the stock moves lower, so I'll look to get in on a 50-75 cent per share pull back, which would equate to paying roughly $30-$40 per call option contract. If I happen to get into these contracts, I'll monitor the position and trade out of it on strength.

The two trades outlined above involve the use of stock options. To learn more about the risks, pricing, calculations, strategies, and options in general click here. The reason option volumes have surged in the last 5 years is because they are a great way to hedge your portfolio as well as create income off of your shares.

These are just examples and are not recommendations to buy or sell any security; if you're more bullish/bearish, you’ll want to adjust the strike price and expiration accordingly.

Disclosure: No Positions