INFN: More Best Stock Lists for 2016

In addition to making the list of top 5 tech stocks in 2016 for Zacks we have the following from Deutche Bank and Forbes:

Deutche Bank Top 5 technology picks for 2016:

http://247wallst.com/technology-3/2015/12/11/deutsche-bank-h…

Forbes Top 10 Small and Mid caps for 2016:

http://www.forbes.com/sites/trangho/2015/12/14/how-to-invest…

As for what we are seeing right now - we have institutions and pros preying upon weak hands through fear propagation tactics (taking advantage of dim forecast news from a peer and selling shares short on low volume to trigger stop loss orders and shake shares loose from the retail investors - that’s you and me). This game is played time and time again, it is frustrating, and it can make you angry to see the under informed become taken advantaged.

The trick is to know what is really going on, and play the pros at their own game.

Be greedy when others are fearful and be fearful when others are greedy.

All signs point to tremendous upside for this stock. Indeed, it is fast showing on top 5 and 10 lists and will be on everyone’s radar in short order. My advice: DON’T let those who are now being greedy right now play you for your fear. Be greedy, too - sit tight, and wait, or better yet, scoop up more shares if you have dry powder. Your future self will thank you.

Best,
–Kevin

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As for what we are seeing right now - we have institutions and pros preying upon weak hands through fear propagation tactics (taking advantage of dim forecast news from a peer and selling shares short on low volume to trigger stop loss orders and shake shares loose from the retail investors - that’s you and me). This game is played time and time again, it is frustrating, and it can make you angry to see the under informed become taken advantaged.

I, for one, am taking advantage of this dip and buying more INFN. The above sounds a bit too conspiracy theorist for me, but I don’t need to understand why the price is dropping. I just need to see it drop and understand my trust in the company to continue to perform.

What you are saying is relevant to the MF theory of buy and hold. So long as I have the same conviction as I currently have around INFN, I will continue to practice that mantra. However, if for some reason conditions change, I may change my mind in the future. Nothing is pointing to any of those conditions changing.

Data is going to continue to be consumed at an increasing rate. At least that is my belief. As long as INFN is at the top of the data transfer market in terms of their competitive advantage, I don’t see my views changing.

One never knows for sure though which is why we keep an open mind to future events…

Thanks,
A.J.

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Confirming the above we have this article here http://www.nasdaq.com/article/relative-strength-alert-for-in…

Legendary investor Warren Buffett advises to be fearful when others are greedy, and be greedy when others are fearful. One way we can try to measure the level of fear in a given stock is through a technical analysis indicator called the Relative Strength Index, or RSI, which measures momentum on a scale of zero to 100. A stock is considered to be oversold if the RSI reading falls below 30.

In trading on Monday, shares of Infinera Corp (Symbol: INFN) entered into oversold territory, hitting an RSI reading of 29.3, after changing hands as low as $19.065 per share. By comparison, the current RSI reading of the S&P 500 ETF (SPY) is 33.3. A bullish investor could look at INFN’s 29.3 RSI reading today as a sign that the recent heavy selling is in the process of exhausting itself, and begin to look for entry point opportunities on the buy side.

and separately, on some big money plays on sure thing bets we have this http://www.nasdaq.com/article/noteworthy-monday-option-activ…

Infinera Corp (Symbol: INFN) options are showing a volume of 6,274 contracts thus far today. That number of contracts represents approximately 627,400 underlying shares, working out to a sizeable 48.5% of INFN’s average daily trading volume over the past month, of 1.3 million shares. Particularly high volume was seen for the $21 strike call option expiring April 15, 2016 , with 2,080 contracts trading so far today, representing approximately 208,000 underlying shares of INFN.

Some big money short sales were made today to get those highly leveraged calls (with much higher returns) on the cheap. Conspiracy theory? Or just really smart people with really big money creating even more opportunity?

Best,
–Kevin

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Some big money short sales were made today to get those highly leveraged calls (with much higher returns) on the cheap. Conspiracy theory? Or just really smart people with really big money creating even more opportunity?

Also consider that if you short the stock, buying calls is protection in case the short goes against you as you would stop seeing losses after it crosses $21. So some “big money smart people” may be taking on $2 per share of risk maximum to bet that the price will decline by more than $2 from where they shorted (assuming they shorted near today’s $19 closing price).

So ask yourself, which way are these big money people really making their bets?

Also, simply seeing RSI under 30 or above 70 is not really a signal for anything other than to trigger a robot to write an article about what indicators show up on some chart scans.

I do have a small position in this company and think it is an attractive business, but I don’t think it’s a slam dunk. If price breaks below 17.50, it could hit 14 very fast and possibly lower after that. I see the argument for investing in the business, but I can also see the case for why someone may want to play that short trade too.

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Also consider that if you short the stock, buying calls is protection in case the short goes against you as you would stop seeing losses after it crosses $21. So some “big money smart people” may be taking on $2 per share of risk maximum to bet that the price will decline by more than $2 from where they shorted (assuming they shorted near today’s $19 closing price).

Respectfully, I just don’t see it. The return for the downside just isn’t there. I’d be giving up $2 additional dollars as my hedge to hope that the stock sails south of $17.00 on my short, and only after that happened would I make a profit on my trade?

On the flip side, if I’m able to push the premium price down by half, I’m able to scoop up twice as many call options, and I do this by selling the same or less in shares short, which I can easily pick back up on the return trip for around the same price - conveniently after I’ve purchased my calls at a discount - with a net wash on the underlying stock I manipulated.

I’ll take my conspiracists view on this one. I’ve seen it happen before. Small cap stocks with generally low volume (relatively speaking) can and will be played with at least while they remain under the radar.

Best (and respectfully),
–Kevin

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Of course there is no way to really know what the intention of the bet was. But 70% on the volume traded on INFN over the past 5 years has been between about 13 and 4.5. It could very easily see $10/shr if the market is week, as that is the high volume area which often is a magnet when things get close to them.

You are correct that the cost of the calls would require below 15 for profit, but either way, getting to new all time highs would make the trade profitable too.

It also depends how they initiated. Was it equal money, as in $1 worth of call premium for each $1 of shares shorted (which would be bullish), or 1 call contract for every 100 shares shorted (bearish, but hedged. And even then, higher strikes could be shorted to create a spread to reduce the hedge cost or make the whole trade a can’t lose situation if it goes up)

I actually think it’s a fairly smart trade, as it’s easy to manage in either direction. I also like the company from a business standpoint, but the chart doesn’t look as attractive technically at the moment.

My point is not to get all technical on things, but that it’s really hard to use large transactions as a major part of your investing thesis or as a reason to yell that it’s manipulators preying on retail customers.
You don’t know the time frame they are working from, what the rest of their portfolio looks like, and what their opinion on the stock actually is. All those differences are what makes a market and why there are good investing opportunities out there.

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