EOT Trade Alert – January 6, 2009

| January 6, 2009

January 6, 2009

Trade Alert:

    Buy APEI March 2009 $45 CALLS at $2.25 or better (QAZCI)

Company Background:

American Public Education (APEI) provides online post-secondary education.  Their target student is military and other individuals focused on public service.  They have two regionally accredited universities American Military University and American Public University.  Current enrollment is more than 33,000.

Short-Term Catalyst:

Everyone knows how bad the economy is.  One of the few bright spots is educational services.

The economy is actually driving business to the education industry.  As unemployment rises, parts of the workforce return to school to develop a new skill set or change careers.

Also because of the recent credit contraction, the U.S. Department of Education is now injecting funds into the secondary market for student loans.

This makes education more affordable.

The recently elected Democratic Congress will work to quickly wind down international military action.  This will push a number of military towards further educational development.  And many look to APEI for that education.

I’m expecting APEI to move higher on improving performance in the next few months. Let’s capture this move by purchasing call options.

On a technical basis, the stock recently bounced off a support level around $36.  On the move higher, it crossed above the 20-day moving average.  We should see the stock follow-through on this price action and continue moving higher.

Trade Details:

Option Ticker Symbol: QAZCI
Underlying Stock Symbol: APEI
Current Bid-Ask Price: $1.60 – $2.05
Option “Buy Up To” Price: $2.25
Break-Even On Stock At Expiration: $47.25
Maximum Risk Per Contract: $225

Exit Strategy:

APEI is trading at $37.83 a share.  Resistance levels will be at $44 and again at $46.50. Support levels will be at $36 and again at $32.50.  Conservative investors should look to exit at the first resistance or support level reached.  Aggressive investors may want to hold out for a bigger move.



Category: EOT Trade Alert

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