An NYSE Scalper's Tale - A Trader's Diary

Thursday, February 23, 2006

On Tap for Fri Feb 24, 2006

Tomorrow I'll watch Clear Channel Communications (CCU). It's been downtrending and is near 52-week lows ($27.82). This stock is part of the SHO List, which means there is no uptick rule for going short on this stock. Watch the $28 level - if there is significant support (size) at that level and it breaks, I'll try to get short. It closed today at $28.10

On the long side, I'll be watching Pepsi (PEP). It's making a run to it's all-time high again, but first it's got to get through resistance at $60. PEP has tried to test the $60 level several times during the last few months, but has yet to close above it. If there is significant size at $60 and it tries to break it, I'll try to get long. PEP closed today at $59.66.

Finally, I'll see how H&R Block (HRB) trades tomorrow. It reported and earnings missed by 7-cents (excluding one-time charges) and also lowered guidance. I found it ironic that HRB, a tax preparation company, reported that it made a tax error and would cost the company millions and that they'd have to restate earnings going all the way back to 2004. As a result of the tax calculation error, they lowered their guidance.

Reading deeper into HRB, I found that this company seems to be having a myriad of problems.

First, they installed a new system that has had all kinds of glitches that kept re-appearing and the company was unprepared for the surge of tax filings. As a result, they had some offices unable to process taxes and cost the company 250,000 customers that are "unrecoverable".

Furthermore, they recently settled a class action lawsuit regarding their "refund anticipation loans", in which HRB loaned money to clients against their income-tax refunds. In return, HRB would receive a percent of the client's tax refund. But these types of loans amounted to interest rates between 40% and 700%. Just last week, another class action lawsuit was filed with similar claims.

HRB has support levels at $23.50 and at $23.00. It has a 52-week low of $23.01. This stock is also on the SHO list and thus easily shortable. In after-hours trade, HRB was at $23.50. I'll see if there is significant sizes at these levels and will attempt to go short if they break. HRB closed today at $25.19.


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