Trading ideas for early next week. Courtesy of Fibozachi.
Short Trade Candidates
GME: Gamestop (Short-Term to Intermediate-Term)
Current Price: 25.22
Candlestick Patterns: None
After rallying for eight consecutive weeks, Gamestop appears due for a pullback that allows price to digest gains and consolidate before re-testing a wide band of horizontal resistance that spans 26 – 28. With price quickly approaching resistance at 26.05, the chances of registering a multi-week swing high appear well above-average. Last week’s narrow range (near doji) plotted alongside the highest weekly volume tally since the first week of January. This type of high-volume ‘churn’ is a flashing yellow light, warning of possible inflection ahead.
Entry: Immediate (with daily confirmation) or with a move below 24.77
Target (Short-Term): 22.75
Target (Long-Term): 21.11
Stop-Loss: 26.06 or higher
Potential Risk: $1.29
Potential Reward (Short-Term): $2.02
Potential Reward (Long-Term): $3.66
Reward: Risk Ratio: 1.6 & 2.8
WAT: Waters Corporation (Short-Term to Long-Term)
Current Price: 70.03
Candlestick Patterns: Doji
Last week’s high-volume doji marked an end to WAT’s eleven week non-stop rally from 56 – 72 and now is an ideal time to begin looking the other way. WAT appears primed to pullback towards 63 over the next few weeks, where even a bull flag would target 64 – 65 before inflecting. An extended move would carry price down towards the previous swing low area of 56 – 57 from the first week of February.
Entry: Immediate (with daily confirmation) or with a move below 68.36
Target (Short-Term): 63.00
Target (Long-Term): 57.00
Stop-Loss: 71.62 or higher
Potential Risk: $3.26
Potential Reward (Short-Term): $5.36
Potential Reward (Long-Term): $11.36
Reward: Risk Ratio: 1.6 & 3.5
LINTA: Liberty Media Holdings (Intermediate-Term to Long-Term)
Current Price: 16.38
Candlestick Patterns: Doji (Perfect)
LINTA has now registered back-to-back dojis up at a previous swing high, which is a specific trading setup that we scan across markets for each and every day. While last week finally provided a bit of venting for Liberty’s eleven week monster rally, price popped back up at week’s end to close just a single penny lower for the week; some weekly pullback, eh? Volume last week was double the average of the previous 3 weeks; when price was sharply rallying. Either last week was simply some profit-taking in a never-ending rally or this price level has elicited a new batch of supply that could overwhelm waning buying pressure.
Entry: Immediate (with daily confirmation) or with a move below 15.66
Target (Short-Term): 13.00
Target (Long-Term): 10.20
Stop-Loss: 16.81 or higher
Potential Risk: $1.15
Potential Reward (Short-Term): $2.66
Potential Reward (Long-Term): $5.46
Reward: Risk Ratio: 2.3 & 4.8
JBLU: JetBlue Airways (Short-Term to Long-Term)
Current Price: 6.52
Candlestick Patterns: Bearish Harami & Tweezer Top
JetBlue has been bouncing back and forth between 3.00 and 7.00 for almost two years now and it looks as though history is about to repeat itself. While last week’s high of 6.84 was a penny greater than the previous week’s high, it fell 3 cents shy of the September ’09 swing high at 6.87. We are looking for a possible swing high that will send price back towards the consolidation zone of 5.00 – 5.50, with the outside chance of an extended move down toward the early February ’10 swing low of 4.64.
Entry: Immediate (with daily confirmation) or with a move below 6.30
Target (Short-Term): 5.49
Target (Long-Term): 4.78
Stop-Loss: 6.88 or higher
Potential Risk: $0.58
Potential Reward (Short-Term): $0.81
Potential Reward (Long-Term): $1.52
Reward: Risk Ratio: 1.4 & 2.6
RSH: Radioshack (Short-Term to Intermediate-Term)
Current Price: 23.17
Candlestick Patterns: Bearish Engulfing
Radioshack has been drifting sideways for seven weeks, consistently failing to muster the strength needed to push above round number resistance at 24. Last week registered a bearish engulfing pattern on increased volume and upside momentum appears to be rolling over. Internal measures are idled and the makings of an ending diagonal / ascending triangle breakdown are in place; ideal downside time targets span 2 – 6 weeks. One conflicting piece of evidence is an open gap that remains unfilled at 27.00 – 28.42, which is not too far overhead from the current price. And though most gaps tend to be filled, one of the few exceptions are breakaway gaps. Like many consumer issues, RSH has reached an area of long-term resistance; price action over the next few weeks will be extremely interesting with so many bilateral setups developing.
Entry: Immediate (with daily confirmation) or with a move below 22.63
Target (Short-Term): 19.90
Target (Long-Term): 18.00
Stop-Loss: 24.02 or higher
Potential Risk: $1.39
Potential Reward (Short-Term): $2.73
Potential Reward (Long-Term): $4.63
Reward: Risk Ratio: 2 & 3.3
Long Trade Candidates
EXC: Exelon (Short-Term to Intermediate-Term)
Current Price: 43.95
Candlestick Patterns: None
Exelon is a bit of an anomaly in that it bottomed along with the rest of the market back in early March of ’09, yet, it has not taken part in the subsequent reflex rally. EXC has drifted sideways for several months, bouncing back and forth between support at 42 and resistance at 52 – 54. If price action continues within this range, it looks like EXC will find support here and start moving up towards the downward sloping trendline of resistance that surrounds our price target at 48.00. Last week registered the highest weekly volume tally of the past three months, so it does appear as though some buying pressure is building after price has remained stagnant for so long. Sharp-eyed readers can see ‘dynamite triangles’ across multiple degrees coming into play.
Entry: Immediate (with daily confirmation) or with a move above 44.16
Target (Short-Term): 48.00
Stop-Loss: 42.77 or lower
Potential Risk: $1.39
Potential Reward (Short-Term): $3.84
Reward: Risk Ratio: 2.8
MON: Monsanto (Short-Term – Intermediate-Term)
Current Price: 65.66
Candlestick Patterns: Bullish Harami (almost an Inverted Hammer)
Monsanto remains on the verge of another breakdown as it just manages to hold above 63.47, which was the November ’08 swing low. Last week registered a bullish harami candlestick pattern after two high-volume sell-off weeks, so this is MON’s last chance to escape technical breakdown. While round number 70 will likely provide initial resistance, a bit of buying pressure should be able to overcome it on the second / third try and send price back into congestion between 75 – 80; thereby averting full-scale technical breakdown and pair-trade hell.
Entry: Immediate (with daily confirmation) or with a move above 67.19
Target (Short-Term): 73.91
Target (Long-Term): 78.50 – 87.00
Stop-Loss: 63.46 or lower
Potential Risk: $3.73
Potential Reward (Short-Term): $6.72
Potential Reward (Long-Term): $11.31 – $19.81
Reward: Risk Ratio: 1.8 & 3 – 5.3
HRB: H&R Block (Short-Term to Intermediate-Term)
Current Price: 18.07
Candlestick Patterns: Hammer & Bullish Harami
H&R Block took a heavy blow at the end of February ’10, falling from nearly 21 to under 16 in just one week. It has since managed to retrace roughly 50% of the decline and continues to exhibit short-term relative strength. If price holds above last week’s low of 17.43, look for shares to continue to head higher over the next month or so towards the 20 level.
Entry: Immediate (with daily confirmation) or with a move above 18.13
Target (Short-Term): 19.57 – 20.37
Stop-Loss: 17.42 or lower
Potential Risk: $0.71
Potential Reward (Short-Term): $1.44 – $2.24
Reward: Risk Ratio: 2 – 3.2
NEP: China North East Petroleum (Short-Term to Long-Term)
Current Price: 8.78
Candlestick Patterns: None
NEP is a fairly new issue (2003) that began to gain in both popularity and share price in May ’09. After running from just over 1 to just under 12, NEP has seen heavy consolidation take place over the past four months. NEP is a unique bullish candidate in that it currently sits just below an all-time high of 11.59, which, if taken out, should result in another substantial move higher. As long as price holds above 7.65 the trade setup remains valid, however, we’re suggesting a tighter stop just under 8 if entry is triggered.
Entry: Immediate (with daily confirmation) or with a move above 8.94
Target (Short-Term): 10.20
Target (Long-Term): 11.59+
Stop-Loss: 7.97 or lower
Potential Risk: $0.97
Potential Reward (Short-Term): $1.26
Potential Reward (Long-Term): $2.65
Reward: Risk Ratio: 1.3 & 2.7
Disclosure: no position in the securities mentioned. During any given session, we may trade any instrument bi-directionally.
