Stock Chart Analysis DEST
Destination Maternity Corporation (Public, NASDAQ:DEST)

As I scanned the markets tonight for possible setups that could be developing over the next day or two, I ran into a very large percentage of charts that looked bearish. With the late day reversal on Monday, many stocks finished near their recent lows and are threatening to slide past very important levels. Although it appears that the markets could accelerate to the downside in the very near future, I like to prepare for all scenarios, and it is still a possibility that last Fridays lows hold as some sort of bottom. The markets are an important junction here, caught between a routine pullback and the beginning of a much more serious decline and nothing can be counted out at this point.

I only found a few bullish setups, but this one in DEST stuck out to me as a great setup. DEST had a very strong rally from the bear market lows in March through early August, rallying from under $5 a share to over $23 per share. It then entered a consolidation that has lasted several months. It recently cleared the consolidation, even as the general markets continue to deteriorate. While DEST has had a fairly strong runup in the past couple of weeks, it may have more upside. DEST is forming a bull flag right at the breakout area and could get going if it cleared the flag. The weekly chart also looks pretty decent and DEST could be a strong option as a long setup if the markets can stabilize and push higher.



Good Trading,

Joey

Here is an intro to an article I wrote on the Book Publishers group last night. I wanted to follow up with a closer look at some charts of McGraw-Hill Companies (NYSE:MHP). I can't post the whole article here, but click through the link if you want to read the rest, and come back to look at the follow up charts below.

Recently, there has been a lot of focus on the eBook industry after Apple, Inc.(Nasdaq:AAPL) released its highly anticipated tablet (iPad), which will compete directly with the Amazon.com, Inc.(Nasdaq:AMZN) eBook reader, the Kindle. Along with adding the new iPad hardware platform into the eBook reader mix, Apple is also introducing the iBookstore. This introduction has several implications for the industry, especially when coupled with Apple's wildly successful foray into the mobile application space following the release of the iPhone.

One indirect impact is that the introduction of an alternate marketplace is providing publishers with some leverage against Amazon. Amazon has had the leverage to enforce its pricing plan on publishers due to the lack of viable alternatives available to them. While much of the focus has been on Amazon, this is a good development for the publishers as well, and their stocks are quietly revealing this as they trade near 52-week highs.

Link to article "Book Publishers Quietly Outperform"

I really like the chart for this stock and the biggest issue I have right now is more with the general markets than with this stock. As I mentioned in the article, its possible that there is enough of a catalyst with the introduction of the AAPL iBookstore to shield this group from a minor correction. However, if the markets suffer a deep correction or worse, than it will probably be inevitable that MHP will follow suit eventually.

I won't rehash what I wrote in the article in regards to the daily chart, but the short story is MHP recently gapped above a prior breakout and consolidation. It is now forming a flag which could lead to a follow through if cleared.

What I didn't show in the other article is the weekly chart. The prior breakout in December followed by a consolidation above the breakout shows up much more clearly in the weekly charts. As long as this breakout doesn't fail, it looks like the logical move is a test of the prior high near $45. However, it could be that the underlying trend has changed here as well. If you notice MHP has been in a clear pattern of lower lows and lower highs. That changed last Autumn, as MHP set a higher low. It followed it up with a higher high on the December breakout. While this is positive, the real test will be that high just above $45.

There are several different setups here, ranging from a swing trade to a longer term position trade, so please exercise your own due diligence if you decide to trade this. I don't have a position in this currently but will be monitoring it over the next few days to weeks.

Good Trading,

Joey

Stock Chart Analysis SPG
Simon Property Group, Inc (Public, NYSE:SPG)

I've been bullish the REIT space for a while, and they have managed to hold up fairly well even as the markets have started to really fall apart. Just two weeks ago, it looked like many REIT's were ready to bounce after finding support at their 20 day moving averages, but they weren't able to fight the markets weakness, and stalled out.

I'm going to highlight the recent action by showing a chart of Simon Property Group, Inc (NYSE:SPG), but the same action is prevalent in many REIT stocks. SPG cleared a large base in August that may of put in a long term bottom for the stock. If you step back and look at this stock on a weekly chart you can see the reverse head and shoulders base quite clearly. The breakout held after a couple of retest's and SPG continued to rally through the end of 2009. SPG was consolidating while holding above the breakout area in January which looked constructive for the bulls. SPG looked like it would bounce off its 50-day moving average on 1/20, but failed the next day and fell back into the prior base. SPG has been fighting the downward momentum in the markets the past week, but ultimately, the recent action is looking like a bear flag.

One of the things I like about this chart and the other REIT's is that they aren't oversold like most of the markets. One of the reasons I have been trying to stand pat recently is that there are very few long setups left, but the majority of stocks are down too much for me to enter a low risk short. Despite looking at these as long setups for the past few months, it looks like the REIT's may be my first options to short in the coming week or two.



Good Trading,

Joey

other REIT's to watch
ProLogis (Public, NYSE:PLD)
Federal Realty Inv. Trust (Public, NYSE:FRT)
Vornado Realty Trust (Public, NYSE:VNO)
SL Green Realty Corp. (Public, NYSE:SLG)
Kimco Realty Corporation (Public, NYSE:KIM)

I recently had a follow up interview with Tim Bourquin of TraderInterviews.com. We discussed my trading style, how I use indicators, risk management, and how I look for stocks each night. It's free for a limited time so if you have a chance check it out:

Trader Profile: Joey Fundora aka "DowntownTrader"

If anyone has comments or questions on the interview, feel free to leave me your thoughts in the comment section.

Thanks for listening,

Joey

Everyone once in a while I like to post some random thoughts on the markets. I think this type of post helps me by forcing me to corral some disconnected rambling thoughts into more coherent thoughts with a specific purpose.

• I was bullish on financial's until proven otherwise, and it looks like I was proven otherwise. It sure looks like a bulltrap was set into motion on XLF and financial's like GS, JPM, etc.
• I've always hated airlines, but I still find them intriguing here and haven't sold my position in Southwest Airlines Co. (NYSE: LUV) yet. Many of these stocks have withstood higher oil prices, an attempted terrorist act, and continuously weak economic data and have held up above their 20 and 50-day moving averages.
• Been sitting on my hands last several days as markets throw up. There has been some real damage to many stocks and I see two possible trading scenarios setting up. The first is a plunge to new lows in the next few days after no real rally attempt or consolidation. I would find this more bullish, as it would flush out a lot of weak hands and setup a possible snap back rally that could be pretty sharp. The other scenario would be a weak bear flag consolidation that would setup a great shorting opportunity.
• Some of the underlying thinking behind these scenarios is that we are starting to get oversold on the Mclellan Oscillator and T2108 (stocks above their 40day MA). We still have room for a plunge, but could get a reprieve already. We theoretically could resume the uptrend from these levels, but the price action in some market leaders recently is suggesting more weakness ahead.
• I've seen several traders attempt at catching a falling knife lately and would like to share my thoughts on the concept. I think its a perfectly valid trading setup to take a stab at picking a bottom, but its probably not for the average trader. The reason I say this, is the average retail trader has a problem managing risk and therefore stopping out of this type of trade. Trying to pick a bottom can be a complicated setup and often a trader will get whacked when they attempt to pick a bottom due to a host of reasons. Often, traders will be early to the party as stocks will move lower than can be reasonably expected. Sometimes you can time a low, but the stock ends up trading sideways before rolling back over. Other times, it will start to move higher only to get the rug pulled out from under it and a trip to even lower lows. The key to this trade setup is for a trader to really understand what the trade setup is and then aggressively playing it. Where the typical retail trader fails, is in buying something just because they perceive it to be a good value with no real plans for how to sell whether the trade goes well or not.

Good Trading,

Joey

I wrote on the home builder stocks earlier this year as a group that was looking strong despite the very negative sentiment still surrounding the group. Fundamental data is still weak at best, and Banks are still very leery of taking on more loans. Despite all the negativity though, the group remains in a favorable position. Tonight I am following up on that article and taking a look at some other home builder charts.

If you look at the three charts below, you will notice they are all trading in a very similar pattern. Overall, the group is in an interesting area, as they have broken free of a declining trading range or channel, but still remain under their recent highs. All three are flagging after a recent run up that took them close to important resistance levels, but ended with them backing off these levels. One of the reasons this group looks attractive here, is the flag is offering a cluster of candles resulting in a narrow range from which a trader can take an aggressive setup. If these stocks clear the small flag, a retest of the prior highs may be in the cards, resulting in a great risk versus reward setup. Beyond this, they could eventually head even higher with some market cooperation. Well defined risk with good possible upside is exactly the type of setup I look for.

The Ryland Group, Inc. (Public, NYSE:RYL)


Brookfield Homes Corporation (Public, NYSE:BHS)


Meritage Homes Corporation (Public, NYSE:MTH)

Good Trading,

Joey

I was interviewed by Matt Davio last fall, but due to a huge backlog in his Interview series, it was only recently published. If you're interested in learning more about how I trade and how I got into to trading check it out.

Joey Fundora @downtowntrader Interview with MissTrade from miss trade on Vimeo.

Enjoy,

Joey