Good evening traders. The markets surged higher on Friday reaching new 52-week highs across the board. I believe we will see a longer term meaningful correction soon, but that could be one or three or five months away, etc. Who really knows? I thought we would get at least some sort of multi-week pullback this month but that has obviously not panned out. So we have to deal with the circumstances in front of us. The catalyst may not have been Goldman Sachs like it was shaping up to be. I will be looking for the markets to sell off on good news which I think will provide us some good clues about the direction of prices. They have already started doing this on some of the earnings reports last week. I expect the markets to continue their volatility this week as the bulls and bears continue the battle. I wrote about a bearish shorter term megaphone pattern forming on the S&P 500 intraday charts in Thursday's Intraday Market Update (archived on the Website). I will be using this as a guide for price action this week. Good luck trading to all of you, and remember to be nimble with position management.
BULLISH Play Updates
Excel Maritime Carriers Ltd. â€“ EXM â€“ close 6.75 change +0.15 stop 6.06 *NEW*
EXM was under pressure early for the third day in a row but buyers stepped in and the stock closed well off of its lows again. The intraday bull flag I mentioned was resolved to the upside. The stock is once again near its 200-day SMA and is still holding onto its daily uptrend line. I am looking for EXM to break through the overhead resistance levels near $6.85. Upon further review, I want to place our first target at $7.10 with a more aggressive target at $7.45. The reason I want to do this is because of the price action on January 11 and 12 of this year. The stock lost about -10% in those two trading days (from high to low) and then proceeded to tank -30% in the ensuing weeks. If anyone was caught holding the bag at these levels and still owns the stock, they will most likely be looking to dump shares which could put pressure on EXM. I suggest readers either take profits or tighten stops if EXM trades to this level. We will make a healthy +8.4% on the trade if that happens. Readers who have not entered positions can do so if there is any weakness in the stock. Our stop is being moved up to just below the 50-day SMA at $6.06. If EXM trades down here it will have broken the upward trend line and broken through all of its SMA's. Our time frame is a couple of weeks.
Current Position: Long EXM stock @ $6.55
Entry on April 20 at $6.55
Earnings Date 05/19/10 (unconfirmed)
Average Daily Volume: 1.2 million
Listed on April 19th, 2010
Fuel Systems, Inc. â€“ FSYS â€“ close 33.68 change +1.24 stop 29.39
FSYS ran away from our trigger today closing up +3.82%. However, FSYS tends to be volatile and I expect a retracement to give us a second chance. My technical comments are basically the same as when the play was released. The stock almost traded to its 20-day SMA and upward trend line support before bouncing hard. The stock has support right at $32.00 and is also forming an ascending triangle that has some time to play out. The company trades at about an 11 PE and its earnings have been steadily increasing over the past year. I believe FSYS will have no issues rallying to $34.65 prior to its earnings report on May 6, but I want a better price than Friday's close. I suggest readers open long positions in FSYS if it trades down to $32.75, up $1.00 from our initial trigger price. Our first target is $34.65 and our second target is $37.00, but there is probably not enough time to reach this level prior to the earnings report. If we get filled and FSYS reaches our target we will earn 5.8% on the trade. We will use a stop at $29.39 which is below its 50-day SMA and a recent swing low. Our time frame is about two weeks.
Suggested Position: Buy FSYS if it trades down to $32.75
Entry on April xx at $xx.xx
Earnings Date 05/06/10 (unconfirmed)
Average Daily Volume: 720,000
Listed on April 22, 2010
Medicis Pharmaceutical Corp. â€“ MRX â€“ close: $25.56 change +0.23 stop: $24.29
We got some reprieve on MRX on Friday as the stock closed +0.91% higher. MRX regained its upward trend line from February 11 which is a positive sign. We are up +2.2% in this trade but the stock keeps getting knocked down at the $25.80 level. I am optimistic MRX can break through this level and reach our target of $26.45 (moved down 5-cents). As it keeps knocking at this level the door should eventually open, especially if the strength in the market continues. However, traders may want to consider tightening stops if MRX rallies into to $25.80 to protect profits. MRX keeps bouncing back and forth between its SMA's and the price is compressing. We should know which direction the price will ultimately go in the next day or two. Our stop $24.29, which is below the 50-day SMA. Our first target is $26.50 and our second target is $27.75, which is just below its 52-week high. I am not suggesting new positions at this time.
Current Position: MRX stock @ $25.00
Entry on April 14 at $25.00
Earnings Date 5/06/2010 (unconfirmed)
Average Daily Volume: 1.0 million
Listed on April 13th, 2010
BEARISH Play Updates
Powershares QQQQ Trust - QQQQ - close: 50.52 change: +0.21 stop: 50.95
QQQQ surged higher late Friday afternoon and our position is struggling. I believe we will see a longer term meaningful correction soon, but that could be one or three or five months away, etc. I thought we would get at least some sort of multi-week pullback this month which is why I initiated this play. Obviously that has not panned out and we have to deal with the circumstances in front of us. I expect the markets to continue their volatility this week as the bulls and bears continue the battle. This should give us some good potential exit points on this trade. I have two targets: the first is $49.55 which is just above the lows on Tuesday, and the second is just above QQQQ's 20-day SMA (currently at $49.14). I will tighten stops if these levels are approached with the assumption that I will be taken out. QQQQ has not touched to its 20-day SMA since February 5 and it is overdue. Wouldn't it be something if QQQQ traded down to this level and then buyers stepped in faking out the bears one last time? The QQQQ would probably proceed to re-test its highs and then fail. If this does in fact happen it would set-up a nice quick trade to the long side. Our aggressive target on this trade is $47.00 but we are looking to exit close to the above mentioned levels. Our time frame is 1 to 5 days.
Current Position: Short QQQQ at $49.05
Suggested Position: Buy PUT May $49.00, Ask at entry, $1.00
Entry on April 12th, 2010
Earnings Date Not Applicable
Average Daily Volume: 49.4 million
Listed on April 10, 2010
CLOSED BULLISH PLAYS
Patterson Companies - PDCO - close: 32.78 change: +0.66 stop: 30.49
PDCO hit our $32.50 target on Friday and we are flat for a +3% gain. I suggest readers that may still have positions to tighten stops up here. Anything below Friday's low would be a flat out bearish sign in my opinion, but I would hate to see traders give back the 66-cent gain on Friday. $32.35 seems like a logical stop based on the intraday charts. I want to reiterate that the stock is also forming a bearish wedge pattern and if it breaks too far below $31.00 I wouldn't want to be involved. These wedges often times resolve themselves to the downside, and swiftly. Plus PDCO has a bunch of congestion from early 2008 to get through. The weekly chart below illustrates these points the best. In fact, I might consider initiating a short play on PDCO at some point in the future.
Current Position: PDCO stock at $31.50
Entry on April 14th at $31.50
Earnings Date 05/17/10 (unconfirmed)
Average Daily Volume: 975 thousand
Listed on April 6th, 2010