The “fiscal cliff” is providing an opportunity in F as it pulls back into the $11.50 range. Today and Monday are the final days for the warrant to trade, and playing a post warrant expiration bounce means getting into the stock today and / or Monday. Obviously it’s better to buy on the price decline, and a decline gives the stock a higher probability to bounce after the expiration.
We’ve been following this expiration closely for the past week, and believe it is right on track to provide a bounce. As we discussed, the pattern is playing out as a normal warrant expiration pattern usually does, but “fiscal cliff” issues impacting the overall market can always disrupt the pattern. Should the pattern break (the stock begin to fall) then any trade we would take on the stock for a quick bounce would be taken off.
One of the beauties of this type of warrant trading pattern is it gives a trader a very specific time to be long the stock for a pop. If the pop fails to materialize and the stock does not behave as the pattern predicts, it also gives a very easy sell signal. Buying the stock based solely on this pattern means selling solely on a break of the pattern.