3SOF

Trad is still hugging 14.80 even though other brokerage firms (ie AMTD) are doing well today.

Based on historical pattern, the stock my have started the down trend.

But the down trend will be gradual one. Look at the history, lthe down trend is slower and last longer than up trend with many bounce backs.

Technically, it is due to a rebound after four days of sell off.

TRAD has not performed as well as expected when it was bought to the Long Term on Fire portfolio. It is therefore a good time to take a second look at this position.

Quote from: David Randolph on January 31, 2006, 07:27:56 AM
I held TRAD "for the long term" previously, but I sold with about a 20% profit. It was a shame, and the stock now is trading much higher. It seems to be technically overbought, but we know how trends can persist despite of overbought/oversold conditions.

Unfortunately it seems like the market couldn't resist taking profit:



Not the best timing for this pick but this is a value portfolio and we will have patience with stocks as long as they are fundamentally attractive.



The chart above shows TRAD performance for the last 12 months compared to its direct competitors and SP500. Two interesting observations: The industry is hot and TRAD has performed very well compared to the competitors.

David did an excellent  fundamental analysis when 3SOF bought TRAD. There is no reason to repeat this. Instead I will focus on the changes since.

When 3SOF bought TRAD it was traded at a heavy premium compared to the other online brokers: Not so today. PE has fallen from 44.1 to 31.0:

Competitors


This is partly because the PPS has gone down and partly because TRAD published excellent earnings for Q4 as reported by Oliver

EPS increased significantly during 2005:



It seem like this trend will continue at least in Q1. The company guided Q1 EPS to be 13-15c per diluted share. I could see them beat that!

Online Brokers have several measures that can be used to assess future earnings. On of them is  DARTs : (Daily Average Revenue Trades). TRAD increased the number of Revenue generating trades with 34% in January and December compared to December last year:



Total client assets also increased with 7.6% during the first two month of 2006 the highest increase in 12 month. Good sign for Q1 earnings.

TRAD's success is based on its unmatched trading platform. TRAD has won more awards than even the best Scottish whisky:

Best Futures Brokerage 2005 - 2006
Best Direct Access Stock Brokerage 2003 - 2004 - 2005 - 2006
Best Option Analysis Software 2005 - 2006
Best Direct Access Futures Brokerage 2003 - 2004 - 2005 - 2006
Best Professional Platform 2003 - 2004 - 2005 - 2006
Best Institutional Platform 2003 - 2004 - 2005 - 2006

The latest award was from Barrons:  TradeStation Receives Highest Rating - 4-1/2 Stars - In Barron's Magazine's Annual Ranking of Online Brokerage Firms

TRAD's advanced trading platform attracts serious investors. The average TradeStation account traded about 530 times per year, or 44 times per month, the average Ameritrade and E-Trade account traded about 10 times per year, or less than one time per month. Also, TradeStation's average assets per equities account of $81,000 in December was substantially higher than the average assets per account of Ameritrade and E-Trade.

Sector watch

Even the best fundamental stock can be dragged down by a correction of the sector and even though the brokerage sector performed excellent in 2005 the chart seems a bit overstretched at this point in time:



Both RSI and MACD show negative divergence and if the sector fails to break the resistance at 227 we have a double top and might experience a sector correction.

Trading Plan

The company seems attractive valued based on its fundamentals and compared to its direct competitors. It has historically grown faster than its competitors and the performance during the first two months of 2006 could indicate that they will surprise to the upside in Q1.

We do however want to limit the risk on this trade. The stock has already not performed as we expected and even though the future seems bright the stock might still be dragged down by a sector wide correction. We will therefore sell TRAD if it closes below 13.50. This should give the stock enough room to show that it deserves our confidence. The Forward earnings are 0.60 cents. With the higher growth it should trade at a premium compared to its direct competitors. With a forward PE of 35 a fair value would be 21. We will sell TRAD if it prints 20.

Disclosure

3SOF has a hold rating on TRAD and if I was a holder of TRAD that is exactly what I would do with a stop loss on 13.50. I like the stock's fundamentals but I want to see how the sector plays out over next week before I initiate a new position.

TRAD sold at 13.46 according to the trading plan.

TRAD is finally moving up with some conviction.

Trad is starting to look good again, going towards the one year high  .

For the past months TRAD has been trading in a nice ascending channel. Still hoping for it to break out of it.

Amarens

The "TRAD" Threads in Previous 3SOF Picks
Have been merged.
Got the go ahead to do so from Ramsburg.
I will be working here on this board to merge other threads also.

I will leave you Friday's closing chart while I'm in this thread....... 

Good trading to all !   

Regards,
Your fellow trader @3SOF
setravis

Updated view.......
TradeStation Group, Inc. Announces the Date of Its 2007 Third Quarter Earnings Conference Call.
WHEN:           Tuesday, October 23, 2007
                    11:00 AM (Eastern Time) / 8:00 AM (Pacific Time)


Could be forming a Head and Shoulders Bottom (reversal) Pattern...
Excellent earnings history.


52wk Range: 9.41 - 16.35
Volume: 598,369
Avg Vol (3m): 495,873
Market Cap: 524.26M
P/E (ttm): 16.50
EPS (ttm): 0.72

Technicals
Close Below the 13-day MA

Last Price Quote is:
-2.85%below 13-day MA
0.61%above 50-day MA
RS Rating: 49 

Fundamentals
Earnings Expected on Oct 23

Key Data:
Market Cap (M): $524.27 
P/E Ratio: 16.50 
PEG Ratio: N/A 
Next Earnings: 10/23/2007
Last Analyst Rating: Outperform