A look at IGT

First, some housekeeping issues. Thanks to Fortitude for the input, here is my course correction.

5% vs. 20%. Your point is well taken. It is true that my trades have been large within the 11K account. Upon reflection, this has been because I DO have other accounts to take care of, and so managing another 10-20 trades at a time is hard. Since the purpose of the challenge was to illustrate how could someone with $11K could create wealth, it follows that this someone would not make $2.5K trades at a time. BUT I don't think that 20 trades is manageable. Let us reduce our single trade capital to $1K and see if we limit our losses from bad trades. I will use group trading so that the 11K account reflects my other accounts, hence I can manage 10 trades or more. This is more work for me, of course, but I am willing to do it.

Avoid earnings. I truly believe that earnings are too much of a wild card. Going through earnings is too risky. We should endeavor to avoid earnings and exit our trades before they occur. IF there is a strong movement after earnings, and that action triggers my system, I can always enter a new trade.

Keep RET in mind. It DOES take time to analyze stocks with RET, but it has proven worthwhile to see if the analysis matches my expectations. It further helps remove the sense of urgency that comes from seeing a stock moves dramatically in one single day.

Make spreads longer term. The QCOM trade seems to be a better trade because it is slightly out of the money and it is set up to 2007. However, bearish trades seem to work out better as short-term trades, no more than 3 months out.


Correcting course is essential to success. So here we go!

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IGT reported excellent results last week, and triggered my system,

http://www.marketwatch.com/news/yhoo/story.asp?source=blq/yhoo&siteid=yhoo&dist=yhoo&guid=%7B97CC1F01%2DB20B%2D41FC%2D9832%2DADCC5B66D47F%7D

But the game machine maker could have done even better, had it not been for the aftermath of Katrina. I suspect that as the rebuilding starts in the Louisiana coast, IGT may actually have a jump in earnings... Perhaps this is what the reaction was all about.

Looking at the 60 min chart, the stock has now corrected somewhat, no more than 38.2% of the rally. Yet, I am getting buy signals from the stochastics oscillator.

The preferred count by the RET is rather conservative in my opinion, but we will take it.




Let us assume that the stock will go to the low 30's by May 2006. This looks like an appropriate trade: