Sleazy Stuff

Sleazy Stuff

I  was doing a little financial surfing last night and came upon this "gem" (Bullish on Ruby Tuesday? The Timing Looks Delectable for a Speculative Trade):

NEW YORK (TheStreet) -- Ruby Tuesday (RT - Get Report) plans to report earnings on Thursday after the close. The price action on Wednesday was interesting and revealing.

The chart forecasts the stock's future direction -- assuming earnings line up with expectations. Ruby Tuesday is a Maryville, Tenn.-based restaurant chain with more than 700 restaurants in 44 states and 13 foreign countries. 

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The price closed below long-established support for the first time in recent months on Sept. 29. Since then, the price has reversed and remained above support. At the point of this return to the upside, the price formed a bullish engulfing pattern, one of the strongest candlesticks. This was confirmed on Wednesday with a bullish single-day signal, the dragonfly doji. This is bullish because the session opens and closes at the same price, in spite of bearish action during the day (seen in the long lower shadow).

This overall price signal activity points to bullish sentiment for Ruby Tuesday. If you agree, this could be a good time to make a bullish move with limited risk exposure. The stock closed Tuesday at $6.45 and the Oct. 5 calls closed with an ask of 1.55. Adding transaction fees, a long Oct. 5 call costs about $164 ($155 + $9). Considering that this call is 1.45 points in the money, the nonintrinsic portion is only 0.10. This means the option is going to react to price movement very closely.

Because there are no guarantees that Ruby Tuesday's price will continue moving upward, this is a risk. However, the risk is limited to a maximum loss of only $164, whereas a potential gain would develop quickly with little interference on the part of time decay. For anyone bullish on Ruby Tuesday, this could be a well-timed speculative trade.

Look at some of these tidbits:

The chart forecasts the stock's future direction -- assuming earnings line up with expectations. What exactly does that mean?  To me it says the chart tells you where the stock price is going, except if it doesn't.

the price formed a bullish engulfing pattern, one of the strongest candlesticks. Ah, yes - a strong candlestock. I wonder if that is the same one that Professor Plum used in the Library?

This was confirmed on Wednesday with a bullish single-day signal, the dragonfly doji. Ah yes, the dragonfly doji.  What I'd like to  see is a study of EVERY dragonfly doji in the past year and what the stock did the following week. Has anyone done that study?

If you agree, this could be a good time to make a bullish move with limited risk exposure.  I can just see lawyers parsing this wording.  It is clearly put together so you can't blame anybody but yourself. "If YOU agree", "this COULD be" "with LIMITED risk exposure".

For anyone bullish on Ruby Tuesday, this could be a well-timed speculative trade. More of the same.

I don't know which is more amazing, (1) that wall street organizations write this drivel or (2) that people actually invest real money based on it.

Finally, I will note that RT dropped 12% the day after the dragonfly doji. Whoops.