Holders of Sungard Data Systems (NYSE:SDS) may be looking for some sun block protection after today's trading at $21 and continued decline to the $20 level. Investors/traders that have been monitoring past technicals like we're seeing in Sungard (SDS) know what we mean. Here's a point and figure chart of SDS that shows the breaking of our bullish support trend along with a spread quintuple bottom sell signal, both coming at the $21 level.
Sungard Data Systems - $1 and $0.50 box scale
Recently, this type of supply/demand chart has seen further downside. It's fairly evident that there had been some supporters of SDS at the $22 level dating back to late last year, but today's action has sellers outnumbering buyers and getting the upper hand. The sell signal back in August at $26 and resulting column of O's gives us a bearish vertical count of $11 to be working with. Investors that are bullish the stock may want to turn to the options market and buy some protective puts as a hedge, just in case the stock does decline to the bearish price objective of $11. The October $20 puts (SDSVD) are offered at $0.90, Nov $20 puts (SDSWD) are offered $1.50 and the Jan02 $20 puts (SDSMD) are offered $2.35.
The broader market indices continue to trade in the red and bearish traders might be looking for technicals like those above in shares of Sungard Data Systems (SDS) that look to be breaking down and losing sponsorship. Traders that can mix in some bullish and bearish trades (bullish strengthening stocks, bearish weakening stocks) are positioned on both sides of the market. The key is to always keep losses small and hang onto the winners until the profits and risk/reward become unfavorable for holding. You can still bat 50%, but if your winner is up 10% and your loser was cut from your holdings with a 5% loss, you're account is a net winner.
Tomorrow we'll get news from the Fed on a potential interest rate cut and that could be market moving. The markets look like they've factored in some type of a rate cut, the only question remaining is how much? Today's action looks to be a little defensive by traders, but many indicators remain in "oversold" territory. Anything can happen tomorrow, but it looks like the bears will cast the deciding vote. Will they cover or will they sit on the sidelines and see if the bulls will give in? That's the ultimate question. Stocks that are "just breaking down" like SDS may have the bulls waiting one more day to try and getting a saving rally to sell into strength. If the market decides to "sell the FOMC news" that's when a stock like SDS can outperform to the downside.