MF Global Holdings is building a base

Sep 20th, 2010 – Comment

I like the story and at this point accumulating a position in a stock that is building a base is not a bad strategy.


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Lou Schizas is an equities analyst, investor, entrepreneur, professor and television and radio personality – and a true believer in the happiness-inspiring powers of capitalism.


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Dear Lou:
As an investor for over 30 years, and a former pension fund manager, every so often you come across a unique situation.  IMO, that has just happened with MF Global in NY, with John Corzine, former CEO of Goldman Sachs coming on board.  As Peter Lynch said in his book, you only need one 10 bagger in your life to change your life forever.  Well, this may be it.
With MF Global having a market cap of 1B and Goldman Sachs a market cap of 80B, the ability to produce a 10 bagger at MF Global vs Goldman is very real.  Corzine came on as CEO in March and the stock jumped $2.00.  They raised equity at $7.10, first it was 140M, then 160M and ended up being 175M or so.  Corzine put up $2.5M of his own cash as well, at $7.10.
I would love to see your tech analysis, especially once it’s above $10.00, which I expect before year end.
Happy Trading,
Gary
Hi Gary,
You put a hook in me with the mention of Peter Lynch, a ten bagger, and Jon Corzine all in one email!! Peter Lynch and his thoughts on investing always get my attention because its simple and well grounded. Jon Corzine who left Goldman Sachs, some say he got pushed out, served as U.S.Senator and Governor from the State of New Jersey.Lets consult the charts and see which way this ship is sailing.
The three year chart depicts the Corzine pop in March of 2010 but it didn’t hold and the presentation that you tuned into on September 13 was not able to move the stock. Another factor that comes into play is that volume. The average volume over the last three months has been 2.6M shares.
Over the last thirty days there have only been 10 days where volume was above the average. A stock can not move higher convincingly without volume. Yes a stock can move higher on thin volume but those cases typically will fall apart like a cheap suit. The fact that MF is consolidating at these volume levels is a better situation than a run up that could fall victim to the air coming out of the balloon.
MF is meeting resistance at $7.50 and above that, as you have observed, at $10.00. The resistance at $10.00 is not what I would call formidable. After that more light resistance at $12.50.  From these levels the historical high is at $30. If you are looking to harvest your ten bagger, MF must reach $75.00. Corzine and company has to create a boat load of shareholder value to mount that summit.
The six month chart illustrates support at $5.50 and resistance at $7.50. The MACD and RSI signalled a strong buy as MF bounced off $5.50. At this moment I am no seeing any indications that the momentum is there to make the push through $7.50.
I like the story and at this point accumulating a position in a stock that is building a base is not a bad strategy. MF is holding onto support along the 200 day moving average at $7.21 with resistance at $7.50.
Below $7.21 there is support at $6.50.
Happy Capitalism!
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