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Traders generating some ideas

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Traders generating some ideas

Stocks remain under some pressure despite weekly jobless claims that came in better than economist's forecast and a 50 basis point rate cut by the European Central Bank.

The Dow Industrials (INDU) 8,636 continues to hover around this 8,600 level with a 100-point decline (-1%), which finds the other major indexes like the S&P 500 (SPX.X) 908.22 -1%, S&P 100 Index (OEX.X) 462 -1%, NASDAQ Composite (COMPX) 1,416 -0.99%, and NASDAQ-100 Index (NDX.X) 1,058 -1% all showing similar percentage losses. Only the smaller cap Russell-2000 Index (RUT.X) 395 -0.51% performs stronger on a RELATIVE basis. This may make sense per previous Index Trader Wraps as my thoughts have been that the smaller caps aren't necessarily targets of bearish traders due to liquidity concerns.

Traders are beginning to look for stocks to short and one stock sent in that has some suspicious intraday technical action that correlates nicely with the supply/demand chart and a bar chartists widely followed longer-term 200-day SMA is shares of Colgate Palmolive (NYSE:CL) $52.68, with the stock reversing an earlier gain like the major market indexes this morning, and now trading in the red.

Colgate Palmolive Chart - $1 box

I like one of our subscriber's thoughts as it relates to a bearish trade in Colgate Palmolive. Today's rally high fell just short of a 3-box reversal, and bullishness may have waned as some bulls from $53-$57 begin taking some defensive action after a nice rally from $44, just after the stock had achieved a prior bearish vertical count. With the stock showing some past ability to achieve a prior bearish count and the current bearish count that's building hinting at a similar $44 level, I think a 1/2 position is warranted on the short side. Ideally, a trade at $54 would have the bearish vertical count column completed and even nicer entry at $55 with horizontal resistance then closer at $58. Idea is to get partial position establish if stock never does reverse, then a bear has claimed an initial position. At some point, the 3-box reversal would complete the bearish count. However, today wasn't the day and may also hint that some traders feel the stock is lower than $44 at this point and need to reduce bullish exposure to the stock.

Jeff Bailey

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