Wang’s Happy Trading

Submitted by OptionDragon.

MELI

Here is MELI’s Business Summary.

MELI is the PayPal, Amazon, and Ebay of Latin America. Need I say more? MELI debuted in August with an IPO price of $21, and currently trades at $73.88. With a float of 40 million shares and Cramer now on the bandwagon, demand has been overwhelming supply. As a long term investment MELI seems to be very promising. Ebay owns almost 20% of the company which is a big plus.
With a P/E of 400 and a forward P/E of 139, this signals a bull market here and although current valuations are stretched no one can deny MELI’s long term growth potential with an under penetrated and fast growing internet audience. MELI has a target audience of up to 500 million people which is much larger than the US. MELI could trade in some correlation to EWZ, the Brazilian market ETF. The option bid/ask spread on MELI can be extremely wide during volatile times and reminds me greatly of BIDU in terms of growth prospects and supply and demand characteristics. I remember when people said GOOG was too expensive and Barron’s wrote the infamous GURGLE? magazine issue cover calling for a drop and a valuation of under $300. It is now trading at $691, case closed. I remember when BIDU was called too expensive and it is now $389. So you get my point? Cramer says that MELI could hit $170 on a future valuation basis due to growth. If you want to make money you gotta look for growth stories like these, as an investor buy it for the long term and as a trader, analyze it and catch the upside cycles or the less frequent down cycles. William O’Neil, one of the Greatest Traders Of Alltime said to pay far less attention to a company’s book value, dividends or P/E Ratio- which for the last 50 years have had little predictive value in spotting America’s most successful companies and focus instead on more important factors such as profit growth, price and volume action, and if the company is the number 1 profit leader in its field. This coming from the lion’s mouth. O’Neil created the Investor’s Business Daily and the CANSLIM method of investing which has substantially beat the market hands down.
MELI’s CY 2007 estimates are for .21 and next year it could be as high as .61 in 2008 or up to 200%. Sales growth is 54.3 %+ in correlation. MELI is the Latin American online market leader in a bullish emerging market, as well as within an infantile, fast growing internet market.
Earnings estimates have been raised the past 90 days on all fiscal forecasts. As MELI hopefully outperforms its earnings estimates, Wall Street will develop more trust in this emerging global investment newbie with only one earnings call since its IPO.
You can also look at MELI as an EBAY spinoff play with all of the growth but none of the slower parts.

Now as to “Price and Volume Action”, one must consult the charts. One of the problems with MELI’s technical analysis is lack of information since it just recently IPO’ed in August so it is a fluid situation as “Price and Volume Action” data gets accrued.
$60 is a definite strong support level base which MELI has recently pushed off with. Remember that Cramer is bullish on it and can bullishly effect the “Price and Volume Action” at any given moment. Since it has a relatively small float, volatility is inherent in MELI’s stock movement characteristics. Whole numbers take an important focus here with $65, $70 as other minor supports.
Previous high of 81 will be the new strong upper resistance and $75 as the immediate pivot and resistance line above. The multi colored horizontal lines are computer generated pivot lines from Real Tick, my trading platform.

I would like to express how important it is to look at different time frames and how it acts as a magnifying glass for analysis of the technicals in any stock or index. Any stock graph is only a depiction of a formula of price and time for that stock. Geometric fractals prove that patterns repeat within a given graph formula until a variable within that formula changes (i.e. shares outstanding). It is of importance to understand that the longer the timeframe of a chart the more powerful it is. The daily or weekly graphs should be the most important and from there the technical foundation should guide your analysis.
Depending on your objective as an investor or trader stop losses vary as well as price targets. As a trader you want tighter stop losses than an investor and lower price targets depending on the objective.
As an options trader I extrapolate the options price over the graph of the stock price looking for first clues in the stock charts before analyzing option strikes and defined risk/reward ratios in an options trade. I look for divergences in stock price and option prices to give me warning over potential supply and demand changes and opportunities of price inefficiencies between the two correlated vehicles. I do look at Level 2 quotes and graphs of both the stock and the specific option contract to gauge liquidity flows, get a good “feel” of technicals together, and finding stop losses, pivot points for stocks and options. If you do not have computer generated pivot lines as I do there are a number of sites which can help you develop stop losses.

CNBC picture time!
The lovely Trish Regan.

Please vote for your favorite Anchorwoman, you get 2 votes! Will post new pictures of our favorite ladies during the week as what they wear is sometimes talked about more than what they say(i.e. Erin’s famous Giraffe dress).
I call this new poll Battle of The Network Queens! Hope you enjoy the fight!

Favorite Quote of the Day!

“Think of yourself as on the threshold of unparalleled success. A whole, clear, glorious life lies before you. Achieve! Achieve!” - Andrew Carnegie

I always want to make sure that every post I put up leaves on a positive, happy note!
Best wishes, and remember to take care of yourself because you are very special to someone!
Optiondragon