Short Sellers and Grizzley BEARS are in control of Cubes stock:
Let's get real here. Cube is now off 40% from its summer highs and the mauling has only just begun. Let's analyze why it will continue.
1) Fundamentally speaking, Cubes earnings growth will get hurt since they do about half their business in Southeast Asia. The Chinese currency is admittedly about 25% over-valued and they will need to devalue their currency in order to remain competitive with the rest of the countries in the region. Such a move is presently being discounted by the market and being reflected in Cubes stock price. What has not been discounted yet is the analysts earnings reductions in relation to Cube. Just wait till they start coming in! Cubes stock will wind up in a free fall! $20 will look like heaven in a few months. Moreover, pricing pressures have already begun again. We all know, if past experience is any guide, that these pricing pressures will intensify, ultimately affecting earnings, margins and even revenues. With a negative cash flow, Cube could be in real trouble, if the situation in Southeast Asia continues to spread and lasts alot longer than most people expect. 2) Technically speaking, Cubes stock has completely broken down. It is well below its 50, 100, and 200 day moving averages. I know you give very little creedence to technical analysis or studying Cubes long term chart, but if you did, you would see that it is extremely bearish looking and pointing straight down to the $10-$12 level. An analyst even downgraded it on Wednesday for purely technical reasons. 3) Sentimental or expectational analysis: This is the most dangerous factor. Usually when a stock falls 40% from its highs, option speculators buy an enormous amount of puts on the stock. In Cubes case, open call interest on the Dec. 20, 22.5,& 25 is more than double the open put interest. This tells me there is a great amount of complacency here. Option Speculators are well known to jump on a trend and usually lose. But nothing is more dangerous to a stocks fate than when a stock falls dramatically and option speculators are still bullish! This means there are still alot of sellers out there and Cube will continue to GO DOWN! Expectations are still quite high for Cube, which is a very BEARISH INDICATOR! To form a bottom, we will need Capitulation by those that are bullish on Cube. This "throwing in the towel", accompanied by disgust and hatred toward Cube was evident this past June; and I gave a screaming BUY signal on Cube at that time when it was at $17. I'm now giving a SCREAMING SELL SIGNAL on CUBE! I'm giving this sell signal not because I have a substantial Short position on Cube, but because all the fundamental, technical and sentimental indicators are extremely bearish and flashing SELL. It's rare that a stock has all these indicators pointing down. But when it does, it represents maximum risk and acute danger on the downside. To bottom fish at these levels will place one under water in a short period of time. I hope there is an early bounce today so I can add to my short position. I leave you and the thread a quote from Bacon: "Doubt all before you believe". |
