EOT Trade Alert – July 25, 2008

| July 25, 2008

July 25, 2008

Trade Alert:

  Buy CLHB January 2009 $95 Calls at $3.00 or better (QPBAS)

Company Background:

Clean Harbors is an environmental and hazardous waste management company.  The have more than 50 waste management facilities, including six incinerators.  The company operates in the US, Mexico, Canada, and Puerto Rico.

Short-Term Catalyst:

A few weeks ago this stock came to my attention – again.  I remember looking at it a few years ago.  The company’s developed into a leading industry player since.  They’ve even created a near monopoly in one part of the business.

There’s no doubt Clean Harbors is a well-run company.  Management is working hard to grow the business, and the customer base keeps growing.  Financial performance has been nothing short of spectacular.  And the stock price reflects this amazing performance.

The company handles hazardous and non-hazardous waste for a number of customers. They’ve systematically bought up a number of the hazardous waste incinerators around the nation.  A new one hasn’t been built in years . . . and don’t expect anyone to “toss one up” any time soon.  Let’s just say their customers don’t have a lot of options.

The rest of the business isn’t bad either.

Signs of a trend?

Back in May, the company updated their 2008 guidance.  Management believes they’ll be able to grow revenue by 8% to 10% and EBITDA by 20% to 22% this year.  Those estimates are higher than prior guidance.

Their guidance was raised at the time of their last earnings announcement . . . which by the way was nothing short of amazing.  It was the third quarter in a row the company beat analyst estimates.  Always a good sign for a stock.

Now here’s what we’re really waiting for…

The company is scheduled to release earnings on August 6th before the market opens. If prior earnings announcements are any indication, I’d expect the stock to jump a bit after the news hits the tape – and trend higher after that if the news is good.

CLHB recently hit a new high of over $80 a share.  Less than 10 days ago the stock experienced a meaningful short term moving average crossover.  It was a good technical indicator that the stock is heading higher.  In addition, the stock bounced off the 50 day moving average earlier this month.  The last time the stock hit that support line it started a 5 month uptrend.

Trade Details:


Option Ticker Symbol: QPBAS
Underlying Stock Symbol: CLHB
Current Bid-Ask Price: $2.35 – $2.70
Option “Buy Up To” Price: $3.00
Break-Even On Stock At Expiration: $98
Maximum Risk Per Contract: $300


Exit Strategy:

CLHB recently hit a new high of over $80 a share.  Because the company is now in new high territory I’m expecting resistance at key psychological levels – most likely $85 and $90.  First levels of support will be found around $72 which is near the 50 day moving average.  Secondary support is at $68.



Category: EOT Trade Alert

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