Sometimes the "stars align" for a summer seasonal play in the oil service sector. It may also be a time to start trying to build on some short-term success, just in case it becomes a longer-term success. Longer-term option plays that date out several months aren't for everyone, but we've got a few subscribers that don't watch the market every minute of every day.
Input/Output Chart - last eleven months.
Yesterday, Input/Output (NYSE:IO) gave a less than spectacular earnings report, but their comments going forward mentioned something about "the potential for 40% growth." That was enough to drive the stock higher. IO makes seismic equipment used by oil and natural gas companies in their efforts to explore for oil and natural gas.
Seitel Inc. Chart - last eleven months.
If the "equipment" side of the exploration business looks strong, perhaps the "service" side of the business is strong too. Seitel (NYSE:SIE) might offer traders a bullish opportunity in the coming sessions to get bullish. MACD has been a good indicator on the daily interval chart for bullish traders to trade off of. In my scenario for exploration related equipment and service stocks to work out, we wanted to see the equipment side of the business (as in IO) look strong; preliminary word from the company is things look good for the future. This now has me thinking that the "service" side of the exploration phase should do well in the coming summer months.
Comments from earlier today in IndexSkybox.com
Starting to pick away on some shorts
Shares of Cisco Systems (NASDAQ:CSCO) look to be breaking down from a "wedge" and this has me looking bearish on the stock short-term.
Cisco Systems Chart - 60-minute interval.
With two downward trends identified on the 60-minute chart and both the 50 and 200-period MA's headed lower, I can't find any reason to be buying shares of CSCO. MACD looks to be rolling over just under the zero level and that's a negative. The NASDAQ Composite and well as the Networking Index (NWX.X) are in the red. With this many negative mounting, I'm thinking the stock is lower. Traders can either use the above MA's as their stops, or our downward trend as a good stopping level. Don't get "overshort" as this is a dull market right now and still looks to be range bound.
NASDAQ Composite Index Chart - 60-minute interval.
We can use what we've observed as levels from the NASDAQ chart to help guide us in a short/put of CSCO. IF (I stress if) the 2,686 level were broken to the downside, shares of CSCO should reach the $33.63 level. IF the NASDAQ were to fall to the 2,616 level, shares of CSCO should be challenging its recent low of $32. IF the NASDAQ breaks down further to our upward trending support, I'm probably looking to cover my short and take profits on the weakness! I'm a trader and not trying to prove a point. If this trade works to our liking, then we can start picking up on other stocks that might provide similar results.
Microsoft Corporation Chart - 60-minute interval.
"On deck" is a bearish trade we identified yesterday and added to our watch list. MACD isn't as favorable as CSCO for shorting and we don't have as many bearish technicals in the chart. We need a weak NASDAQ to get the ball rolling on this, but I do think the stock is vulnerable to "filling the gap" to $56.25. If we can take $4 from CSCO and $4 from MSFT, we'll be happy. IF (I stress if) we get up by more than $2 in any of the trades, we will move our stops down to breakeven. Again, this is a dull market and anything can happen.