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Website: http://www.sanmina.com
http://finance.yahoo.com/q/pr?s=sanm
As the major stock indices broke lower in late June and early July, falling below their prior 2010 lows, we noticed that semiconductors and related stocks were not following suit. Indeed the SOX was holding the bottom of its trading range as it had done on four prior occasions. As you know, we opined at the time that the market could be showing a false breakdown and it behooved us to be ready for a reversal and rally. Given the chips' strength, we cast about for chips in good shape.
We put on plays for several including ALTR, NVLS, LRCX, and SANM. We liked SANM as it was also holding its range, coming back toward the prior early June low that was now coincident with the 200 day SMA. Nice double bottom, perfect for a move higher.
Two days after we put it on the report, SANM and the rest of the market broke to the upside, SANM jumping off its 200 day SMA. We moved in with some stock positions at $13.52 and some October $12.50 strike call options, sporting a solid 78 delta, at $2.45. The stock was running that day so we did not have to wait long for the gains. Indeed because the market was so oversold we were looking for a rather explosive move.
As it turns out, SANM was up 5 of the next 6 sessions. A big move Tuesday put it close to our initial target at the June peak. Wednesday SANM surged again, but it started to struggle after rallying through our initial target. After a big surge 5 of 6 sessions, the decision was easy, particularly as SANM had hit our initial target. We banked some stock at $16.08, an 18.9% gain. We sold some options for $4.20, pocketing 71+%. Not bad for six days in the play. We kept some positions, but were wary given the reversal on Wednesday. The stock sold Thursday but held the 50 day EMA. That was cool. Friday, however, SANM broke the 50 day. We decided to take the rest off the table with a trailing stop and watch for a test back down in the range toward the 200 day SMA. If it holds we can look to reload once again and play another roll in the range as the chips, despite the late week selling, look super (look again at ALTR, XLNX for example).
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