Good evening traders. The market was just too much for our positions to overcome on Friday. But we were not stopped out on anything and haven't been proved wrong on the trade set-ups yet. MCO will not cooperate and trigger our short entry so we are waiting. I also released a new a short play on SINA. Hopefully these two plays can offset weakness on the long side if broader market weakness continues. GFI is performing well and we are looking to exit this position and FSYS this week ahead of earnings.
I anticipated volatility this past week and that is exactly what we got. My guess is that the volatility will continue this week. We will probably see another bounce early next week before a bigger drop comes later. I would be tightening stops on long positions if the market shows strength early in the week. Our portfolio has stocks from defensive sectors on the long side and a couple of short trades we hope to be triggered on Monday. This will allow us to take profits on positions regardless of market direction. It has been a difficult market to navigate over the past couple of weeks. Stay on your toes and good luck trading.
BULLISH Play Updates
Corning, Inc - GLW - close 19.25 change -0.69 stop 18.80
GLW has sold off almost -9% since its intraday high on Tuesday. Our position is struggling and off by -4.23%. The selloff is surprising because the company beat earnings expectations and raised it forecast for LCD glass demand. Traders have punished the stock and I'm not really sure why, other than a pre earnings run up to a resistance area and post earnings drop which I suppose makes sense. Obviously the market weakness on Friday didn't help matters either. In any event, GLW trades at a low 11.6 PE ratio. Most analysts rate GLW as a buy or outperform and I don't think this will change due to the strong fundamentals of the company. The weak hands are selling the stock and it is getting ever so close to reaching our stop at $18.80. The stop is below GLW's 50-day and 100-day SMA, 20-week SMA, as well as a gap higher from the $18.88 close on March 17. The stock may want to close this gap before reversing. If I am going be long stock and honor the upward trend that has lasted since March 2009, GLW seems like a good place to be. GLW has a lot upward trend line support that has remained intact since November 2008, but some of these trend lines are below our stop. My guess is that if our stop is taken out GLW will probably trade down to $17.25 so this is my line in the sand. It is do or die time now for GLW. I have listed four potential targets traders can use as a guide to exit the position: $19.80, $20.25, $20.90, and $21.70. Our stop will be $18.80 and our time frame is several weeks. Readers who have not entered positions can do so at these levels and be rewarded nicely if GLW trades higher from here.
Current Position: Long GLW stock at $20.10
Suggested Position: Buy JUNE $20.00 CALL
Entry on April 29 at $20.10
Earnings Date Over two months
Average Daily Volume: 14 million
Listed on April 26, 2010
Enzo Biochem, Inc. - ENZ - close 5.97 change -0.33 stop 5.74
I couldn't find any news that would have caused ENZ's selloff on Friday. It was probably just good ole fashioned profit taking coupled with broad market weakness. Unfortunately we were on the wrong side of the trade. When analyzing this trade set-up I'm not sure I would have done anything too different. ENZ initially broke through a $6.36 resistance level on 4/22 and then curled back to re-test it which we thought would hold as support and was our basis for taking the trade. But Tuesday's sell-off proved us wrong when the stock blew right through $6.36. So we find ourselves battling a key pivot level for the stock at $6.36 which is below our entry point. I suppose placing a lower trigger to enter the position would have been smarter in hindsight. But unfortunately hindsight is not a luxury we have in trading. So where do we go from here? First, the stock is above a congestion area that lasted about two months from November to January (see shaded rectangle on chart). Second, ENZ still finds itself in a bull flag that has formed since March 2nd. This bull flag is above the aforementioned congestion area. These two facts tell me that ENZ should find support here. However, if the stock breaks below our stop at $5.74 it is my queue that the stock has technically failed and will probably trade down another 40 or 50 cents, so we will step aside if that happens. In addition, overall market weakness will probably cause weakness in ENZ, although the biotechnology sector can be defensive. Our stop remains at $5.74 and I have listed multiple targets on the chart which we will be using as a guide to exit the position. The targets are $6.30, $6.40, $6.70 and $6.95. These are areas where ENZ will most likely find resistance. I suggest traders tighten stops at these levels or simply exit the position. Our time frame is a couple of weeks. Readers who haven't initiated positions can do so using $5.74 as a stop and could be nicely rewarded nicely if ENZ can recover from here.
*NOTE: Please use small position size to limit risk as I consider this to be an aggressive trade. The stock's average daily volume is 160,000 shares which can add to volatility.*
Current Position: Long ENZ stock @ $6.52
Entry on April 26 at $6.52
Earnings Date 6/15/10 (unconfirmed)
Average Daily Volume: 160,000
Listed on April 24, 2010
Fuel Systems, Inc. â€“ FSYS â€“ close 31.47 change -0.86 stop 29.39
FSYS surged higher early on Friday before retreating and giving back all of the gains from Thursday. So we find ourselves in the same situation. The good news is that FSYS found support $30.85 which is near a low from Tuesday and might be a double bottom formation; however, the stock needs to follow through from here. As soon as FSYS approached this level the stock reversed closing well off its lows (+62 cents, or +2%), while the major indices did not. This could have been the "whoosh" the stock needed prior to moving higher. This whoosh also probably took out a lot stops. The stock is still holding its upward trend line from March 4th. If the stock can follow through from here we will have a good chance at hitting our target. I have listed 2 targets that I suggest traders focus on when exiting positions this week: $33.90 and $34.65. I expect FSYS to continue rallying into its earnings report on May 6th, especially if the market bounces from here. If FSYS reaches $33.60 it is a +3.5% gain. If it reaches $34.65 it is a +5.8% gain. Our stop remains at $29.39 which is below its 50-day SMA and a recent swing low. I am not suggesting new positions now as we plan to be out of this trade prior to the company's earnings report on May 6. Our time frame is 1 to 3 days.
Current Position: Long FSYS stock @ $32.75
Entry on April 26 at $32.75
Earnings Date 05/06/10 (unconfirmed)
Average Daily Volume: 720,000
Listed on April 22, 2010
Gold Fields Ltd - GFI - close 13.44 change +0.18 stop 12.25
GFI had its best closing high since January 13. The stock closed +1.36% higher and also closed above $13.36 resistance from the past three weeks. GFI almost closed higher than yesterday's high but ended up just 1 penny shy. I expect GFI to continue breaking out and to retest its YTD highs near $13.95. Gold Miners were one of the strongest sectors on Friday while the market was under severe pressure, probably because the yellow metal has continued its rally. I am also eyeing $13.75 as a potential exit because it is just below the lowest YTD closing high (as opposed to intraday high). If GFI rallies to $13.75 this will give us a +4% gain. At $13.95 we will have a +5.6% gain. These are the targets where I suggest readers begin to exit positions or tighten stops. Our official target is $13.75. Trying to squeeze out an additional 20 cents is probably not the right thing to do unless the market, and gold stocks in particular, are extremely strong. GFI reports earnings on Thursday, May 6th so I plan to be out of this trade before their report, regardless of whether or not the above targets are hit. I would like to move up our stop to $12.79 which is just below the low from April 28th and the 20-day SMA. Our time frame is 1 to 3 days. I am not suggesting new positions at this time. *NOTE: Please use small position size to limit risk as gold stocks tend to be volatile.*
Current Position: Long GFI stock at $13.21
Suggested Position: Buy MAY $13.00 CALL, current ask $0.60
Entry on April 29 at $25.21
Earnings Date May 6, 2010 (unconfirmed)
Average Daily Volume: 5.3 million
Listed on April 28, 2010
Hi-Tech Pharmacal Co. - HITK - close 24.33 change -0.40 stop 22.45
HITK appears on the verge of breaking out of a downtrend line that started on January 4th. It also has upward trend line support from August 2009. It has recently rallied to a prior high from April 15 and pulled back on Friday. I suggest readers use one of two triggers to buy HITK stock. If the stock pulls back buy the stock on weakness. $24.05 is a logical level as this is just above Thursday's lows and provides an ideal entry point. However, if HITK breaks out to $25.25 before pulling back buy the stock. There is little resistance up to $26.50 which is our first target. A more aggressive second target is $27.85. Our initial stop is $22.45 which is below the stock's 20-day and 50-day SMA. Our time frame is several weeks.
Trigger to buy HITK on weakness or a breakout above $25.25, whichever happens first.
Suggested Position: Long HITK stock at one of two triggers listed above.
Entry on April xx at $xx.xx
Earnings Date July 5, 2010 (unconfirmed)
Average Daily Volume: 230,000
Listed on April 29, 2010
BEARISH Play Updates
Moody's Corp. - MCO - close 24.72 change -0.50 stop 28.60
MCO is not just cooperating with our entry trigger. The stock closed down another -1.96% today. I would like to our move our trigger to enter short positions down a little more to $25.45 from. The original trigger was $25.90. I am essentially suggesting short positions on any relief bounce in MCO. There also is strong resistance in the $26.00 to $26.50 area which I expect to hold if MCO can even make it back up there. My comments from the past few nights remain the same. MCO's chart is broken and a lot of damage has been done. The stock is forming bear flags on its daily chart and I believe conditions are ripe for the decline to continue. The stock was hanging on to a recent support level and its 200-day SMA (both in the $26.00 area) which was broken on Monday. I am bearish on MCO and if the market starts a significant pullback MCO could be a nice winner for us. I would like to place an initial wide stop at $28.60 just in case there is a spike in the stock from short covering or a news event. If that happens I am confident MCO will be sold by many who may still be holding long shares creating additional pressure. There is plenty of resistance and congestion just overhead as well. Our target is $23.25, with as more aggressive target of $21.85 which could get hit if things get ugly. Our time frame is a couple of weeks.
Suggested Position: Short MCO at $25.65
Suggested Position: Buy JUNE $25.00 PUT, current ask $1.58
Entry on April xx at $xx.xx
Earnings Date Over two months
Average Daily Volume: 3.5 million
Listed on April 26, 2010