Long Play Updates
Axsys Tech. - AXYS - cls: 73.47 change: -1.11 stop: 71.95
AXYS announced big news this week, but that big news wasn't reflected in the daily or weekly charts. Monday, AXYS announced that the U.S. Army's Thermal Weapon Sight II (TWS) Bridge program had awarded it an infrared lens order worth $9.7 million. By Friday, Zacks had added AXYS to its strong-buy list. None of this supposedly good news impacted AXYS's price as it churned just above and below its simple 10-sma. By Thursday that churning had dropped it within a few cents of our stop. The shape of daily and weekly candles concern us, suggesting that readers be alert to the possibility of our stop being hit, but AXYS gradually climbs along with the slightly rising 10-sma, and the candles illustrate indecision and do not prove that a drop is coming. Our stop, although a tight one for a stock currently showing some volatility, appears well placed to take readers out of this long play if AXYS's hesitation produces a pullback instead of a move higher. Through the first half of 2008, AXYS tended to bounce off its 30-sma, and this week's candle presents the possibility that it might either trade sideways while the 30-sma plays catch up or even retreat to that moving average. Today's close back above the 10-sma was, however, encouraging. Our first target is $79.95. Our second target is $84.00. As a review, this week's move over $76.00 has produced a new triple-top breakout buy signal on the Point & Figure chart, and the most recent data available listed short interest at 8.8% of the small 9.1 million-share float.
Picked on August 12 at $75.82
Cal-Maine Foods - CALM - close: 45.83 change: +1.01 stop: 41.30*new*
This week, CALM garnered attention from TheStreet.com, CNBC and Motley Fool, and the attention of new buyers benefited our trade. The first profit target was hit on Thursday. By Friday, CALM had added to its gains, but in doing so, it hit the top of a long-term rising price channel seen on its weekly chart, pulling back by the end of the day. What we want to see is for CALM to break out of that channel or else keep rising along with the top of the channel. However, the possibility of either prolonged sideways consolidation or a pullback before another charge higher must be considered. We strongly urge readers who did not take partial profits at the first profit target to consider doing so now. We're raising our stop to $41.30, just below the 8/08 low and well below the simple 10-sma at $42.95. We would like to move it closer to the rising 10-sma, but CALM can be volatile with big down days produced, too, during the climb off the summer low. We don't want to get stopped out just before it zooms higher again. We're not suggesting new positions at this time. As noted earlier, our first target of $44.90 was hit this week. Our second target is $49.00. The P&F chart is bullish with a $56 target. CALM has HUGE short interest. The most recent data listed short interest at almost 92% of the 14.2 million-share float. A new high could spark another short squeeze.
Picked on August 04 at $40.75
Esterline Tech. - ESL - close: 53.58 chg: +0.38 stop: 49.90
No news was good news for ESL this week. After dipping to its simple 200-dma Tuesday and Wednesday, providing a new entry for readers, ESL zoomed to a $53.94 high Friday before pulling back. As we noted in last night's newsletter, however, with the former resistance at that 200-sma and historical resistance near $52 behind us, ESL's next hurdle was the top of its consolidation zone from June, at $53.84. ESL indeed found that next hurdle difficult on Friday, pulling back off that high on Friday. Don't be surprised if ESL trades sideways for a week or two, perhaps even churning between the simple 200-sma at $51.34 and resistance near $54.00. Although the upside target has not been met, conservative traders might consider whether they want to use bounces to lock in at least partial profits. We are aiming for the $57.00-60.00 zone, but this was intended as a short-term, two-week play with an exit before the August 28 earnings report and we don't want to see prices consolidate for a week or two. We know that our target is aggressive given our time frame but the latest data put short interest at more than 9% of the small 29 million-share float. The stock could see a short squeeze ahead of earnings. We would like to raise the stop to just under the 7/24 high but that doesn't give the trade enough room to work yet, especially as the last consolidation zone near this level, seen in early June, had a low of $50.85. Conservative traders who are using bounces to lock in partial profits might consider raising their stops to just below that 6/18 low of $50.85.
Picked on August 12 at $52.30
Graham Corp. - GHM - cls: 100.87 chg: + -6.10 stop: 99.95
Although GHM received some positive buzz this week, price action had begun narrowing into a rising wedge shape by Thursday instead breaking out in a more bullish pattern. We had warned that this was an aggressive, higher-risk trade, but by Thursday were warning that the less aggressive of the aggressive consider tightening their stops. However, for most aggressive traders, the $99.95 level still appears to be the most appropriate level for a stop as it allowed GHM to come down a retest the top of a rising price channel in which it was formerly contained, to see if the former resistance now holds as support. GHM came within four cents of that stop. The weekly candle was doji, presenting the second week in a row of indecision. Since the spring, GHM has resolved such indecision by another bounce, and that's what we hope to see this time, too. As noted earlier in the week, GHM remains a strong candidate for a short squeeze. This stock has an extremely small float of just 4.5 million shares. The short interest is over 10% of the float. Our target is $114.50.
Picked on August 12 at $106.52
Harley-Davidson - HOG - close: 42.56 chg: +1.21 stop: 39.45
HOG was another play in which prices came precariously close to our stop this week before rebounding. In HOG's case, that happened Wednesday and Thursday. By the close Thursday, HOG had bounced from its converging simple 200-day and 10-day moving averages. By Friday, it bounced back above its exponential 200-day moving average. On the daily chart, the setup looks bullish, with a nice 200-sma and 10-sma test, as well as a test of the trendline off the July low, and a bounce from that support. The weekly chart shows a doji at resistance, but a new high above this week's should get more going to the upside again. Previously we outlined our concerns about the struggles HOG is facing with a slowing consumer and tighter lending, but according to The Motley Fool, HOG is "enjoying significant investor support." We would like for a bit more of that support to kick in and send it higher still. We are leaving our stop at $39.45 for now as that's just below the rising trendline off the July low and just below the simple 200-sma. That stop certainly worked for us this week. Our target remains the $47.50-50.00 zone, and we suggest that traders begin to lock in profits as the lower edge of that target zone is reached. The latest data lists short interest at 12% of HOG's 232 million-share float. The P&F chart is bullish with a new buy signal.
Picked on August 11 at $42.55
Juniper Networks - JNPR - close: 26.97 chg: -0.05 stop: 25.99
On CNBC's FAST MONEY, Pete Najarian covered JNPR as a buy in a segment titled "Your First Move for Friday, August 15." Somebody listened. JNPR popped to an early high of $27.65, just high enough for that first move to trigger our $27.55 entry. Price was soon to succumb to the weight of the 200-sma that it had just popped through, however, producing a bearish candle on the daily chart. JNPR did maintain a close near that $27.00 level and MACD turned up with the move, so the possibility exists that the daily candle suggests nothing more than a needed day or two to consolidate near $27.00 or, perhaps, a pullback to the simple 10-day moving average before it charges higher gain. We do not see any changes from our prior comments on JNPR now that the trade is triggered. We are listing two targets. Our first target is $29.45, just below the 5/02 swing high of $29.49. Our second target is $32.50. As always, we suggest you take some money off the table at the first target and maybe even as it's closely approached, in case selling comes in just ahead of that 5/02 swing high. We are starting with a stop loss at $25.99. That is not the best risk-reward ratio for a stop loss but JNPR can be somewhat volatile. You may want to use a tighter stop loss, but this one is near the bottom of a best-fit rising trendline off the July low and also not far below the simple 10-day moving average and exponential 200-day moving average, both near $26.23.
Picked on August 15 at $27.55
Monster Worldwide - MNST - cls: 20.32 chg: -0.09 stop: 17.85
On CNBC Friday, David Katz of Matrix Asset Advisors said he liked MNST, but by the day's end, MNST was little changed in price. Wednesday, we had suggested that aggressive traders might want to buy MNST's bounce, and a further opportunity was offered Thursday with a drop to $19.61. Then MNST bounced. We suggested a tighter stop if you did buy the dip, with one possibility being a stop under Wednesday's low or a stop under the simple 10-day moving average, currently at $19.40. MNST was pressured down by the simple 10-day moving average for months and may now bounce from it on the way up. For the official trade, the current entry zone to buy MNST is the $18.60-18.25 range, with this trade offering a better risk/reward parameter for conservative traders. This is especially true since MNST remains in a long-term downtrend on the weekly chart. Our risk here by not buying MNST now for the official trade is that we could miss the move but we'd rather be patient with our entry point, given that long-term descending price channel. If we are triggered at $18.60, our target is the $21.75 mark.
Picked on August xx at $xx.xx <-- see TRIGGER
Short Play Updates
Capital Trust - CT - close: 13.86 change: -0.04 stop: 16.35
After Thursday's downgrade by UBS to a sell rating, CT gapped lower, but left a doji just above the July low. The UBS analyst cited CT's heavy exposure to subordinated and short-term loans. However, volume perked up a bit from recent days while price stayed in a tight range, with such action suggesting an ongoing bear/bull battle, with bulls at least holding their own. The worry had been that CT would gap back up Friday morning, isolating Thursday's doji. That kind of action sometimes occurs when smart money wants to trap bears, but no such gap occurred. CT produced another doji, with the resultant week's candle a regular old bearish, if somewhat small-bodied candle. Daily MACD again approaches the 0.00 line after bumping higher earlier in the week. We mentioned midweek when adjusting our stop that CT is prone to quick rebounds. For that reason, that the stop was left wide and aggressive, but appropriately placed just above a descending trendline that has been pressuring CT lower over recent weeks. More risk-averse traders might consider the fact that CT has been finding resistance on daily closes at a the simple 10-day moving average, even on days when it pierces it intraday. They might consider setting stops just above that moving average, perhaps near $15.55. This would place the stop immediately above a tight, best-fit descending trendline off the 6/05 high and may not give CT much room to consolidate sideways before a next strong move, but would take readers out of the play quickly in case of a strong bounce. Each choice has its pros and cons, and readers should decide whether to stick with the official stop or to set one near $15.55. As noted midweek, the most recent data listed short interest at almost 28% of the small 19 million-share float. That definitely raises our risk for a short squeeze. Target one is $12.55, which seemed achingly close at the end of the week. Since a dip to our first target would likely constitute a test of the support on the long-term descending channel seen on the weekly chart, readers should definitely consider locking in partial profits as that first target is hit. Our second target is $10.25, last seen in May, 2005.
Picked on August 04 at $14.38
Merrill Lynch - MER - close: 26.29 change: +0.31 stop: 28.01
With news that New York Attorney General Andrew Cuomo had reached auction-rate settlements with more banks this week, some financials either stopped their declines or rebounded on Thursday. MER, however, spent a third week consolidating, producing its third weekly doji in a row. Its news wasn't so good, if those settlements could be considered good. On Friday, Attorney General Cuomo announced that although his office had reached settlements with five major banks, the office was preparing to take legal action against MER. MER's spokespeople expressed astonishment, vowing that they thought progress had been made and further talks were in the works. The attorney general doesn't like MER's suggestions and gave MER five days to come up with something better. The deal that's ultimately reached might prompt a renewed way of selling or, alternatively, a relief bounce. With that deal perhaps in the making, we are not suggesting new entries at this time. Our stop is rather tight but will take readers out of the play if that relief bounce begins. We don't need much of a swoon to hit our first target: all that's needed is a drop to test the support of the long-term descending price channel for MER. We suggest that readers lock in partial profits if that first target of $22.50 is hit. Our second target is $20.25. The Point & Figure chart is bearish with a $7.00 target.
Picked on August 07 at $26.10
Closed Long Plays
Closed Short Plays
Cincinnati Fincl. - CINF - cls: 28.69 chg: +0.43 stop: 28.35
CINF decided to torture us this week. A day after triggering the trade, CINF turned around and climbed up to within a cent of our stop before retreating. An end-of-day rush brought CINF higher again, with a few 25-contract trades crossing after the official close at a level just above our stop. However, most sources listed Thursday's high at $28.34, a penny below our stop. Our trade was held open with the warning that it might be stopped early Friday morning. It was. This time, the move was decided and persisted into the close of the week. The possibility existed that this was just part of CINF's choppy consolidation pattern, but stops are stops. CINF could instead be preparing for another bounce attempt.
Picked on August 13 at $26.99