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Travel with Tumi on Short Squeeze Trip Higher

Tumi is recognized as the world's leading brand of luxury travel--duffel bags, carry-ons and more. Their luggage has been consistently recognized as the best travel products by leading consumer publications.

While the company was started in 1975, it is a fairly new stock in the market. Tumi holdings came public on April 19, 2012, it peaked that very same day after hitting a high of $28.70.

The stock came under pressure due economic pressure not only here in the U.S. but also overseas. On August 6, Tumi reported their quarterly earnings: EPS +400%, sales +22%, 3-year sales growth +25%, EPS estimate % change for current quarter +500%. These numbers took the Street by surprise, the stock was up 23% the next day.

Since then the stock has been drifting sideways for the most part it now fits the definition of a possible PEAD stock-- "post-earnings-announcement drift", or PEAD. This is the tendency for a stock's cumulative abnormal returns to drift in the direction of an earnings surprise for several weeks (even several months) following an earnings announcement.

Here is the trade-- go long the stock through 21.75. Place a stop at 20.50, with the first target at $24.

With only 20 million shares in the float and 25% of that float short the stock could experience a massive short squeeze if it starts to move higher.

Tumi Long Trade Analysis



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About the Author


Frank Zorrilla is the founder and chief investment officer of Zor Capital LLC. He began his Wall Street career 10 days after his 20th birthday when he became a Series 7 licensed stock broker. He was a full service broker for 13 years. In 2011, Zorilla decided that his success, no non-sense approach and expertise were better suited as an independent rather than under the reins of a brokerage and so he formed ZorCapital LLC. He is a momentum based trader who uses technicals, fundamentals, and sentiment analysis to base his buys and sells.

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