Adam Hewison just came out with an update on the oil markets and how a confluence of signals are projecting a pullback to the $59 area followed by likely support. The video is short and sweet, and as always, free to watch. Click on the image below to watch.
Good Luck,
Joey
Stock Chart Analysis GLF
GulfMark Offshore, Inc.(Public, NYSE:GLF)
Oil stocks got crushed Friday, with many oil service stocks dropping over 4%. With oil down over 3%, it looks like this group may be in for a rough start to the week as well.
GLF is an interesting chart in this sector, because while it is down fairly sharply over the past few weeks, it is also very close to breaking a support level. Looking at the chart for GLF, there are a few well defined areas of interest, that clearly show levels of support and resistance. Initially in late February, GLF broke down and quickly reversed higher, forming a V bottom and setting a bear trap that caught short sellers off guard. GLF almost doubled in about a month following the new low, and then trading in a tight sideways base. It broke out of that base in June, but quickly failed the breakout, this time catching the bulls off guard.
GLF is now back in that tight base, and threatening to break lower. A breakdown from this area could easily lead to a test of the V bottom breakout near $21. While, I'm not a big fan of shorting stocks that are oversold, but I will be watching this one to see how it deals with this important level.
Good Trading,
Joey
Stock Chart Analysis ZBRA
Zebra Technologies Corp.(Public, NASDAQ:ZBRA)
I've been holding a small position in ZBRA for a few weeks now based on the breakout over a large base. Recently it has been consolidating tightly over the prior base, as volatility dies down. It has managed to hold tight, despite a few negative days in the market, and was one of the few stocks to remain over their 20-day moving average on the recent market weakness. This morning it received an upgrade and is gapping over the recent consolidation. While I don't advocate chasing gaps, this is a good one to watch to see how it trades on a pullback to fill the gap. I will be following it closely, and may add to my position if I see it pullback into support and then turn back higher.
Good Trading,
Joey
Stock Chart Analysis LNC
Lincoln National Corporation(Public, NYSE:LNC)
There is an interesting trade setting up in Lincoln National Corporation (NYSE:LNC). LNC has been very strong the past few months, along with its peers in the Life Insurance sector. It rallied close to 300% from the March low to the recent high near $20. While the rally was large in terms of percentage gained, it really looks like part of a much larger consolidation range that began last November. Notice LNC had a similar rally off the November lows, which capped a nasty bear market correction of over 80%. LNC failed to reach the high it put in in January and appears to be pulling back again.
While I am not typically a fan of shorting stocks in intermediate uptrends, this is looking like a very good setup in terms of risk versus reward. LNC is showing weakness by setting a lower high, and recently gapped lower after failing to clear the 200-day moving average. It retraced and filled the bearish gap and is starting to drift up in what looks like a small bearish wedge. A break of the bearish wedge, which also coincides with the 50-day moving average could signal a continuation of the weakness initiated by the gap down.
The reason I like the risk versus reward here, is that the target for a short trade are is much larger than what I would need to risk. On a healthy uptrend, stocks can typically retrace about 1/2 of the last leg up. This is a normal retracement that wouldn't signal a major trend change. Looking at LNC, the 50% retrace level is near $12.40. With a stop near $17.10, this leaves us with about $1 risk and a $5 reward. These are the types of setups that will payoff even with a win percentage under 50%. I'll be watching LNC for a break of this wedge, especially, if the markets continue to pullback.
Good Trading,
Joey
Stock Chart Analysis AIPC
American Italian Pasta Company(Public, NASDAQ:AIPC)
AIPC was one of the stronger stocks in the market over the past several months, rising almost 700% from March 2008 through April 2009. It has been rising steadily over this time, forming small lateral bases, with gaps above the bases following a few weeks later. Recently, it had been forming another lateral base, but instead of clearing it, it gapped down and broke under the base. This may be an important change of character for this stock, as investors that have been used to steady gains, are now facing the prospects for a deeper correction.
Looking at the more recent price action, AIPC broke under the 50-day moving average and has been reversing at each test of the average. There is a small trendline forming over these tests, that has been a good spot for shorting opportunities. AIPC is currently back in this area, and has had three indescisive candles showing a little restraint on the part of buyers. I will be watching for a breakdown here as a possible shorting opportunity.
Good Trading,
Joey
I was featured in an interview by Damien Hoffman of Wall Street Cheat Sheet on the Top 3 Mistakes new Traders should avoid, along with Joe Donahue of upsidetrader.com. You can check out the interview here. Any comments are welcome and appreciated.
Good Trading,
Joey
Stock Chart Analysis ULTA
Ulta Salon, Cosmetics & Fragrance, Inc.(Public, NASDAQ:ULTA)
I mentioned on twitter today how I was noticing retailers at the high of day in spite of the market hitting new lows for the day. I also noticed this same behavior last week on a weak day. Usually when you see many stocks in a sector hitting highs together, it signals an institution or fund buying a basket in the group. While this wasn't enough of a reason for me to try and fight the trend day down, I decided to watch some retail names later in the afternoon. Later in the afternoon, I noticed some retailers continuing on the earlier strength, but the markets still looked ugly. In the end, many of the retailers backed off the new highs, but held up much better than the other sectors. I decided to enter into ULTA late in the day as a swing trade due to a few positives in the charts and despite the negative outlook in the general markets.
ULTA recently cleared a lateral consolidation that could also qualify as the handle in a cup and handle base formed from January through June. It cleared the base on a small uptick in volume before surging on a gap a few days later. It is now in the process of testing the breakout area and is becoming oversold as it begins the test. The 20 and 50-day moving averages are both over the 200 day moving average and sloping higher. ULTA was able to find support on the 50-day MA last Friday, and cleared that candle today. While ULTA may still have some backing and filling to do, there was enough of a chance that it would hold this area as support combined with the positive candle today, that I took the trade. With the markets threatening a deeper pullback, I will be very aggressive in taking profits if the trade works in my favor. As always, please follow up with your own due diligence if you are considering a similar trade.
Good Trading,
Joey
Stock Chart Analysis MRX
Medicis Pharmaceutical Corporation(Public, NYSE:MRX)
MRX is posing an interesting setup here. It cleared a long base in May on a high volume gap. It has been trading sideways since the breakout, attempting to fill the gap on a few occasions. Every attempt to pullback into the gap and prior base has been met with sharp buying. Volume has been tapering off through the consolidation which is a healthy sign. The bollinger bands have also narrowed tightly, revealing the drop off in volatility. Volatility should be ready to expand soon, and the stock should have a nice move once it gets going. While Bollinger bands don't predict the direction of the breakout, there are plenty of signals on this chart hinting at an upside breakout. I'll be watching for a break above 16 to hold as a signal.
Good Trading,
Joey
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