Fibozachi and Chopshop’s proprietary trading methods provide them with ideas for short, intermediate and long-term trades in a weekly timeframe. This report discusses potential trade setups they’ll be watching for possible entries. Their system is based on technicals of given stocks, but not to the exclusion of the greater context of stock market action. We hope you enjoy this report and as always, we appreciate feedback. – Ilene
FIBOZACHI FORECAST: WEEK OF APRIL 5TH
Courtesy of Fibozachi & Chopshop
Last week, one of our 3 bullish candidates, DNR, was the 2nd greatest gainer (+11.2%) across the S&P 500. This week, after sifting through our scans on Friday night, two underlying themes stood out: energy patch up, consumer discretionary down.
With oil completing a follow-through to the upside from a large “W” pattern on the daily, natural gas hinting at a major swing low across daily, weekly and monthly profiles, ‘commodity-related’ currency crosses positioning themselves for sharp relief rallies, the US equity market looking for a new group / sector leader to push the S&P 500 cash (INX) through 1182, and a veritable VLCC (very large crude carrier) of proprietary ‘buy warning’ signals plotted … price action across the entire energy complex could become impulsively explosive to the upside this week.
While only a handful of individual issues are highlighted here, we must underscore the extraordinary breadth of energy issues registering proprietary ‘buy warning’ signals alongside very bullish technical setups. The energy patch, utilities included, appears primed to pump higher.
Have a great week !
– Fibozachi & Chopshop
Short Trade Candidates
DELL: DELL (Short-Term to Intermediate-Term)
Current Price: 15.03
Candlestick Patterns: Filled White
Dell had rallied into last week, but now appears to have lost most of its bullish momentum. An extremely narrow range, filled white candle registered within the trading range of last week. Last week’s high of 15.20 also failed to push above the prior week’s high of 15.25, which will be our stop for this trade.
Entry: Immediate (with daily confirmation) or with a move below 14.83
Target (Short-Term): 14.00
Target (Long-Term): 12.75
Stop-Loss: 15.27 or higher
Potential Risk: $0.24
Potential Reward (Short-Term): $1.03
Potential Reward (Long-Term): $2.28
Risk: Reward Ratio: 1: 4.3 & 1: 9.5
NKE: NIKE (Intermediate-Term to Long-Term)
Current Price: 74.11
Candlestick Patterns: Bearish Squeeze Alert, Filled White
NKE has closed higher for 8 consecutive weeks … a Fibonacci number that often coincides with cycles on both daily and weekly charts. Interestingly, each of the last 2 weeks has been engulfed by the trading range of the week before, registering a “Bearish Squeeze Alert” candlestick pattern. We are going to try to catch an intermediate to long-term top here, which has the potential for some large gains. Be aware that the level 70.00 may provide strong support and delay a move down to 61 – 67.
Entry: Immediate (with daily confirmation) or with a move below 72.78
Target (Short-Term): 66.62
Target (Long-Term): 60.89
Stop-Loss: 74.84 or higher
Potential Risk: $2.06
Potential Reward (Short-Term): $6.16
Potential Reward (Long-Term): $11.89
Risk: Reward Ratio: 1: 3 & 1: 5.8
PCLN: PRICELINE.COM (Short-Term to Long-Term)
Current Price: 257.00
Candlestick Patterns: Doji
PCLN registered a nearly perfect Doji by opening at 257.12 and closing at 257.00, a difference of 0.05%. This may put a halt to the never-ending rally for the time being and the extremely narrow range of last week allows for an extremely tight stop with some juicy downside profit targets. A break of the sharply rising trendline of support will likely have very bearish implications moving forward.
Entry: Immediate (with daily confirmation) or with a move below 252.00
Target (Short-Term): 231.49
Target (Long-Term): 192.72
Stop-Loss: 263.00 or higher
Potential Risk: $11.00
Potential Reward (Short-Term): $20.51
Potential Reward (Long-Term): $59.28
Risk: Reward Ratio: 1: 1.9 & 1: 5.4
F: FORD MOTOR (Intermediate-Term to Long-Term)
Current Price: 12.69
Candlestick Patterns: None
Ford’s rally has now carried from 1.01 to 14.54, which enables fantastic risk: reward trading setups for a longer-term trade. The (sloppy) shooting star two weeks ago may have marked a multi-month high just shy of 15.00. While Ford may not immediately plunge over the short-term, the price zone of 8.75 – 10.50 is likely to act as a “price magnet” once the bearish momentum picks up.
Entry: Immediate (with daily confirmation) or with a move below 12.42
Target (Short-Term): 10.41 – 8.86
Target (Long-Term): 6.54
Stop-Loss: 13.29 or higher
Potential Risk: $0.87
Potential Reward (Short-Term): $2.01 – $3.56
Potential Reward (Long-Term): $5.88
Risk: Reward Ratio: 1: 2.3 – 4.1 & 1: 6.8
BIG: BIG LOTS (Short-Term to Long-Term)
Current Price: 36.82
Candlestick Patterns: None
BIG failed to grab a new high last week by 17 cents before proceeding a sell-off that picked up some bearish momentum by week’s end. We are looking for a quick continuation move down to our first target at 33.70 – 34.00, but the ‘real’ support level and ideal profit target is 31.00 – 31.50.
Entry: Immediate (with daily confirmation) or with a move below 35.80
Target (Short-Term): 31.39
Target (Long-Term): 28.50
Stop-Loss: 37.65 or higher
Potential Risk: $1.85
Potential Reward (Short-Term): $4.41
Potential Reward (Long-Term): $7.30
Risk: Reward Ratio: 1: 2.4 & 1: 4
HD: HOME DEPOT (Short-Term to Long-Term)
Current Price: 32.20
Candlestick Patterns: None
Home Depot appears to have met some resistance at 33.00 and now offers a nice risk: reward trade setup after 3 weeks of consolidation. While the 31.00 level may initially provide support, it is likely to eventually give way for a move back down to 27.50 – 29.50.
Entry: Immediate (with daily confirmation) or with a move below 31.96
Target (Short-Term): 29.44
Target (Long-Term): 27.19
Stop-Loss: 32.89 or higher
Potential Risk: $0.93
Potential Reward (Short-Term): $2.52
Potential Reward (Long-Term): $4.77
Risk: Reward Ratio: 1: 2.7 & 1: 5.1
HAS: HASBRO (Intermediate-Term to Long-Term)
Current Price: 38.35
Candlestick Patterns: None (almost a Shooting Star)
Toys are looking ‘toppy’ here … last week almost registered a Shooting Star candlestick pattern, while plotting an intra-week high of 39.59. This looks like a great spot for a FNH (Failed New High) to occur; just below the August ‘08 highs at 41.68. A reversal here is likely to head back down to support at 36.00, but both support and a large unfilled gap remain at 32.75. It may take some time, but this gap will be filled.
Entry: Immediate (with daily confirmation) or with a move below 38.10
Target (Short-Term): 35.80
Target (Long-Term): 32.75
Stop-Loss: 39.23 or higher
Potential Risk: $1.13
Potential Reward (Short-Term): $2.30
Potential Reward (Long-Term): $5.35
Risk: Reward Ratio: 1: 2 & 1: 4.7
MAT: MATTEL (Intermediate-Term to Long-Term)
Current Price: 22.61
Candlestick Patterns: None
Interestingly, Mattel’s chart is very different from that of Hasbro, yet both suggest that a top may be in for the ‘toymakers’. MAT registered a bearish Harami two weeks ago and followed it up with a sell-off into the end of last week. While it is possible that a small reflexive bounce or some sideways consolidation may occur over the next week or two, any increase in bearish momentum from this point ought to send shares back towards initial support at 21.00, with 19.00 as the next stop.
Entry: Immediate (with daily confirmation) or with a move below 22.49
Target (Short-Term): 21.05
Target (Long-Term): 19.07
Stop-Loss: 23.48 or higher
Potential Risk: $0.97
Potential Reward (Short-Term): $1.44
Potential Reward (Long-Term): $3.42
Risk: Reward Ratio: 1: 1.5 & 1: 3
Long Trade Candidates
UNG: NATURAL GAS ETF (Short-Term to Long-Term)
Current Price: 7.35
Candlestick Patterns: None (almost a Bullish Harami)
UNG put in a bullish engulfing, wide-range candle last Friday, which may very well mark an swing low over the next several months. The weekly candle almost registered a Bullish Harami candlestick pattern, however the trading range was larger than last week’s, thereby invalidating a ‘true’ pattern. Nevertheless, it appears that a Fibonacci-based, 13-week High-to-Low cycle may play out and finally lead to the reversal so many traders have been awaiting.
Entry: Immediate (with daily confirmation) or with a move above 7.42
Target (Short-Term): 8.50 – 9.00
Target (Long-Term): 11.00
Stop-Loss: 6.79 or higher
Potential Risk: $0.63
Potential Reward (Short-Term): $1.08 – $1.58
Potential Reward (Long-Term): $3.58
Risk: Reward Ratio: 1 : 1.7 – 1: 2.5 & 1: 5.7
CNX: CONSOL ENERGY (Short-Term)
Current Price: 44.06
Candlestick Patterns: Bullish Harami
Most energy stocks are looking bullish heading into next week, but CNX’s trade setup looks ideal for a short-term pop over the next few weeks. If our entry price triggers, it is likely that CNX will push up towards 48.00, which is near the 50% retracement of the previous decline from roughly 55 to 42. However, a recent gap remains unfilled between 51.00 and 52.50 and CNX may be able to grab it with one last bullish push before the buyers completely exhaust themselves.
Entry: Immediate (with daily confirmation) or with a move above 44.26
Target (Short-Term): 48.00
Target (Long-Term): 52.56
Stop-Loss: 41.79 or lower
Potential Risk: $2.47
Potential Reward (Short-Term): $3.74
Potential Reward (Long-Term): $8.30
Risk: Reward Ratio: 1: 1.5 & 1: 3.4
AES: AES (Short-Term – Intermediate-Term)
Current Price: 11.30
Candlestick Patterns: Bullish Harami
Another energy stock candidate, AES, has been weak since the end of ’09 and after back-to-back hammers failed to produce a reversal 4 weeks ago, it looks like last week’s picture-perfect Bullish Harami managed to find support at 10.75. Energy stocks tend to have great volatility, so if this trade works we expect to hit our targets without too much delay or consolidation.
Entry: Immediate (with daily confirmation) or with a move above 11.37
Target (Short-Term): 12.50
Target (Long-Term): 14.24
Stop-Loss: 10.64 or lower
Potential Risk: $0.73
Potential Reward (Short-Term): $1.13
Potential Reward (Long-Term): $2.87
Risk: Reward Ratio: 1: 1.6 & 1: 3.9
FE: First Energy (Short-Term – Intermediate-Term)
Current Price: 39.40
Candlestick Patterns: Bullish Harami
After an intense 7-week sell-off that began on January 1st, 2010, First Energy has now been moving sideways in a consolidation phase for the last 7 weeks. If there is going to be any bounce or upward retracement, it is likely to take place sooner than later. Last week’s Bullish Harami may prove to be the kick-off point for a short-term rally. Like the other energy stocks, this is another fantastic risk: reward trade setup.
Entry: Immediate (with daily confirmation) or with a move above 39.58
Target (Short-Term): 41.57
Target (Long-Term): 44.79
Stop-Loss: 38.29 or lower
Potential Risk: $1.29
Potential Reward (Short-Term): $1.99
Potential Reward (Long-Term): $5.21
Risk: Reward Ratio: 1: 1.5 & 1: 4
MFE: McAfee (Short-Term – Intermediate-Term)
Current Price: 40.17
Candlestick Patterns: Mirror Doji ( top & bottom shadow are of equal length )
Every 3-4 weeks, McAfee exhibit’s the kind of volatility that trader’s dream of; so long as they are on the right side of things. Thought the 42.00 level may provide early resistance, thereby resulting in just a 3% gain; there is an overwhelming amount of short-term bullish divergences that could result in an extended move towards 45.00.
Entry: Immediate (with daily confirmation) or with a move above 40.72
Target (Short-Term): 42.00
Target (Long-Term): 45.50
Stop-Loss: 39.85 or lower
Potential Risk: $0.32
Potential Reward (Short-Term): $1.28
Potential Reward (Long-Term): $4.78
Risk: Reward Ratio: 1: 4 & 1: 14.9
QID: UltraShort QQQQ (Short-Term – Intermediate-Term)
Current Price: 16.78
Candlestick Patterns: Doji, Hollow Red
Yes … one of the ‘longs’ is a leveraged inverse of the QQQQ. This is for those who do not have the ability to short stocks in their brokerage accounts and instead, must mainly rely on using inverse ETF’s in order to achieve the same effect. This one is plain and simple folks … the QQQQ eeked out a new low last week by just 6 cents, however still managed to close higher than the week’s open. We have a great opportunity to catch a HUGE move here, while only risking a 3.7% loss if we are wrong.
Entry: Immediate (with daily confirmation) or with a move above 17.04
Target (Short-Term): 18.27
Target (Long-Term): 20.10 – 22.15
Stop-Loss: 16.38 or lower
Potential Risk: $0.66
Potential Reward (Short-Term): $1.23
Potential Reward (Long-Term): $3.06 – $5.11
Risk: Reward Ratio: 1: 1.9 & 1: 4.6 – 1: 7.7
Disclosure: no position in the securities mentioned at the time of publication. During any given session, we may trade any instrument bi-directionally.
