EOT Trade Alert – September 10, 2010

| September 10, 2010

September 10, 2010

Trade Alert:

   Buy CBU Feb 2011 $22.50 Calls at $2.25 or better

Company Background:

Community Bank System (CBU) is a bank holding company.  Community Bank, N.A. has over $5.3 billion in assets and more than 150 customer facilities across Upstate New York and Northeastern Pennsylvania.

Short-Term Catalyst:

Pessimistic investor sentiment and an uncertain economic outlook has done a number on bank stock lately.  But that’s about to change.

We’re seeing clear signs of economic growth in key leading indicators.  And that’s great news for all bank stocks.  But banks with strong balance sheets and good loan portfolios stand to benefit the most.

And CBU fits the bill to a “T”.

In their most recent quarter, CBU grew earnings at an impressive 77% over the previous year.  And total revenue increased 11.7%.

They also grew their loan portfolio by $29 million and collected an additional $114.8 million in deposits.

And they’re doing all this in a very soft market.

Their strong performance has led to accelerating earnings growth estimates.  But with investor sentiment so horrible, CBU’s stock hasn’t taken off yet.

With a rebound in investor confidence looming, CBU should rocket higher in short order.

And CBU’s chart looks good too.

Right now CBU is just above two key technical support zones.  We’ve seen buyers step in on any dip below $22.  And now the upward trending 200-day moving average is providing support as well.

Let’s grab these undervalued at-the-money call options on CBU now.

Trade Details:

Underlying Stock Symbol: CBU
Current Bid-Ask Price: $1.75 – $2.15
Option “Buy Up To” Price: $2.25
Break-Even On Stock At Expiration: $24.75
Maximum Risk Per Contract: $225

Exit Strategy:

CBU is trading at $22.48 per share.  Resistance levels will be at $25.25 and again at $27.  Remember, we want this stock to move higher.  Support levels will be at $21 and $20.  Conservative investors should look to exit at the first support or resistance level. Aggressive investors may want to hold for a bigger move.



Category: EOT Trade Alert

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