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Bad news may be buying opportunity

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After a rather remarkable turnaround in from late night lows this morning's stock futures indicated that stocks would open higher. So far this morning, trading has been mixed as the Dow Industrials (INDU) hang on to a 22 point gain at 10,227, while the broader S&P 500 has edged fractionally lower at 1,124, as has the tech-heavy NASDAQ Composite, trading down 3 points at 1,798.

One stock I've profiled as bullish this morning is a bit different perhaps that past "recommendations" subscribers are use to and I've put this one out for "aggressive bulls" only. However, this morning's report of human remains found at a burial plot operated by Service Corp. International has the stock trading down roughly 20% at the $3.60 level.

Service Corp. Chart - Daily Interval

Shares of Service Corp. (SRV) used to be a highflier and traded like a rocket from 1995-1998 from $15 to $45 on an aggressive acquisition strategy that has built the world's largest provider of death care facilities in the world. Today's gap down comes on morbid news, but may present a short-term traders opportunity to buy near support.

In February, SRV reported revenues of $630.9 million and earnings of 9-cents a share that easily beat estimates among analysts looking for earnings of 3-cents a share.

I'm profiling this trade for aggressive bulls only, with a stop under this morning's low of $3.40 and targeting the $4.50 level. I'd manage the trade by raising a stop to break-even in the trade should the stock clear the 61.8% retracement level of $3.97.

In December, a civil lawsuit was filed against the company alleging that human remains had been mishandled at two of its Florida cemeteries in order to make room for additional burials. The company said it continues to cooperate with authorities and is "appalled" by the recent events in West Palm Beach.

Jeff Bailey
Senior Market Technician
Option Investor

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