Recent Department of Education’s draft rules related to incentive compensation have met with a mixed reaction. Credit Suisse is cautious. Piper thinks it is manageable. Wedbush calls it slightly negative. Our take on fundamental basis remains negative. The draft rules recommend elimination of 12 exceptions to a 1992 law that barred for profit colleges from paying admission officers based on the number of students they enrolled. We believe that, if enacted, these rules will eliminate the boiler room environment and reduce enrolment.
Technicians have been taking comfort from the rounding bottom formation on the chart. However, on a break below $54.55 this formation will be invalid and may result in stops getting hit. Our plan is to add to our short position on a break of $54.55, hunt for the stops, and use our Fund Flow screen to guide us to take some short term profits as the stock may rebound after stops are taken out. We will maintain our original core position.
