Caught Between a "ROK" and a Hard Place

My first real post regarding a stock. Yay! I'll be honest and straight to the point. I am not the greatest at writing and the whole point of these blogs is to just say it as it is and I'm going to do just that. If you've been watching Rockwell Automation (ROK), which I doubt you have, this stock has been on a scream upwards. Bank of America recently upgraded the stock from 26 to $50 just yesterday citing conditions that fundamentals are improving. Improving!? Yes, they beat estimates by four pennies (23 cents, analyst estimate: 19 cents), but this is after they drastically reduced their FY2009 guidance from first quarter from 1.55-2.25 range to 1.40 - 1.70. Who isn't going to beat this quarter's estimates!?


Let's not forget that Rockwell's largest customers include almost all of the automobile companies. Automotive is doing terrible (for lack of a better word) and there are no signs of improvment by the end of this year. Consumer confidence ratings just came in at 46.0 for July vs the so called analyst estimates of 49.3. As long as automotive is in a slump, so too will all of the companies that benefit from their prosperity.

Looking at the technicals, we may see a bit of a push upward since bears (shorts) own about 8% of the shares outstanding giving this stock a 7.9 days to cover ratio and given the volatility of the market, I wouldn't be surprised of another 5% jump before we consolidate. In addition, we also made a move past 39.00 which was a psychological resistance point giving us a bit more room to about 42.50.

But let's not let the upgrades fool us. This month alone has been a 25% jump. I can bet you a dollar that someone (if not everyone) is in the money and just about ready to pull the sell trigger and when they do, I'll be riding on top of that wave with my shorts.