American Italian Pasta Company (PLB)

Company

"American Italian Pasta Company is the largest producer and marketer of dry pasta in North America. The Company has four plants that are located in Excelsior Springs, Missouri; Columbia, South Carolina; Tolleson, Arizona and Verolanuova, Italy." (company website)

Sell short

25-Jul-06. Dieters and investors both take a dim view of pasta these days. PLB is in a nearly 5-year-long downtrend (see right). It looked for a time earlier this year that PLB had bottomed (see sidebar), but that promise of recovery is starting to look a lot like the ones in 2004 and 2002. Instead of carbo-loading, traders are carbo-unloading. I'm betting that I can cover this short with some cheap pasta.

• Price momentum (PPO) — has none
• Trend (ADX) — strengthening, but with selling pressure (-DI) above buying pressure (+DI)
• Money flow (CMF) — flowing into PLB (and I still don't get this)
• Relative strength (RSI) — neutral
• Volume — steadily declining

Buy to cover

16-Aug-06. I will be the first to admit it: I don't have a clue what's going on.

For no apparent reason, PLB opened this morning 50¢ higher than it closed yesterday and then immediately shot up another 20¢ putting it up 9% on the day. This left me scratching my head in bewilderment and weighing what to do next.

On Monday the company had announced that the CFO was leaving and that it expected to be up-to-date with financial filings by the end of Q1 of 2007. 2007! (The company hasn't filed any earnings reports in almost a year and previously said that it was restating 3 years worth of reports.) On Tuesday, PLB stock plunged $1.10 from the open (post hoc ergo propter hoc?), but recovered most of that to end the day down less than 3% (see sidebar). The only mention of PLB yesterday was in an article raising the very good question how it is that Apple Computer (Nasdaq) is threatened with delisting after missing just one reporting deadline, whereas PLB (NYSE) apparently gets a free pass.

In the face of all this madness, I decided to cover my short position and at least make the trading costs. My order to buy at $8 sat for the longest time in the queue. Interestingly, after my trade executed, the price immediately dropped another dime. What's up with that?

This is now the second time that I have watched the price of a stock take a sudden tumble and then erase most or all of the loss (the same thing happened with RNWK). Rather than discourage investors, such a deep plunge seems to be taken as a "final throe" that signals a reversal. I fear the same thing may have happened to LTBG, which I still hold short.

Moral: When opportunity knocks, cover the damned short and say thank you!