Good evening. The results of my scanning this weekend provided very little opportunities for long trades. I looked at several hundered charts and was unenthused with prospects to the long side. However, I did find a few in the pharmacuetical space and have chosen to release MRK below. I'll also share some additional trade set-ups with you that I think have some potential.
Long C - I like C as a speculative long play. The government has been selling its stake and when the selling begins to wane C could be in for a sustained run higher. If C breaks above $4.07 it could see see $4.50 to $5.00 fairly quick.
Long DF - The stock looks like it is ready to break out of resistance near $11.10. If it does there is a lot of clear air overhead with little resistance. There has been a big institutional seller of this stock over the past year which has beat it down. It is cheap now and looks ready to bounce higher, possibly up to $12.50 and then $14.00.
NEW BULLISH Plays
Suntech Power Holdings - STP - close 11.79 change +0.43 stop 9.73
Suntech Power Holdings Co., Ltd. (Suntech) is a solar energy company, which is engaged in the design, development, manufacturing and marketing of photovoltaic (PV) products, including a range of building-integrated photovoltaic (BIPV) products and also provides engineering, procurement and construction services to building solar power systems using its own solar modules for certain related party and third party customers. Suntech's products provide electric power for residential, commercial, industrial and public utility applications in various markets worldwide. It also provides PV system integration services to customers in China and the United States, and is expanding into the development of utility scale solar power systems. Suntech sells its products in various solar energy markets worldwide, including Germany, Italy, the United States, China, South Korea, Spain, the Middle East, Australia and Japan.
Target(s): 11.35, 11.90, 12.15
Key Support/Resistance Areas: 10.50, 9.90
Time Frame: Several weeks
Why We Like It:
STP broke out of a key resistance area at $10.50 on Thursday and continued higher on Friday. STP has now closed above its 50-day SMA for the first time since late April. The stock made a higher low and a higher high. STP is in a longer term downtrend but has some room to run before reaching the primary downtrend lines and overhead resistance. I am looking for STP to retrace some of last week's gains and suggest readers initiate long positions in the stock if it trades to $10.65. This is just above Friday's low and the $10.50 prior resistance area that should now act as support. If we get filled the stock has some room to move higher. Our first target is near Friday's high and would represent a +6.5% gain if the position play out as expected. NOTE: STP is a volatile stock and I view this as a speculative play. Please use proper position size to limit risk.
Suggested Position: Long STP stock if it trades to $10.65
Suggested Position: Buy August $10.00 CALLS, current ask $1.68, estimated ask at entry $1.20
Entry on July xx
Earnings Date 8/19/10 (unconfirmed)
Average Daily Volume: 3.5 million
Listed on 7/10/10
Merck & Co - MRK - close 36.30 change +0.44 stop 59.38
Merck & Co., Inc. (Merck) is a global health care company that delivers health solutions through its medicines, vaccines, biologic therapies, and consumer and animal products, which it markets directly and through its joint ventures. The Company's operations are principally managed on a products basis. The Pharmaceutical segment includes human health pharmaceutical and vaccine products marketed either directly by the Company or through joint ventures. Human health pharmaceutical products consist of therapeutic and preventive agents, sold by prescription, for the treatment of human disorders. The Company sells these human health pharmaceutical products primarily to drug wholesalers and retailers, hospitals, government agencies and managed health care providers, such as health maintenance organizations, pharmacy benefit managers and other institutions.
Target(s): 37.95, 38.60, 39.35
Key Support/Resistance Areas: 39.50, 38.75, 38.00, 36.35, 35.80,
Time Frame: 1 to 2 weeks
Why We Like It:
MRK is building an ascending triangle on its daily chart with resistance near a key pivot level for the stock at $36.35. The stock formed a bullish inverse head and shoulders pattern that began with the left head in April (see large ovals on chart). If MRK trades above Friday's highs there is little resistance until about $38.00. Earnings are at the end of July and I expect this stock to make a run. I suggest we use any weakness to initiate long positions or a break above Friday's highs, whichever occurs first. The stock has closed above its 100-day, 200-day, and 20-day SMA's which are all converging so I don't expect too much pullback from here. Let's use a trigger of $36.50 and $35.85 to initiate long positions. Our stop will be $24.79 which is below all of the aforementioned SMA's and the lows from 6/21 and 6/23.
Suggested Position: Long MRK stock if it trades to $36.50 or $35.85, whichever occurs first.
Options Traders: Buy August $36.00 CALLS, current ask $1.40
Entry on July xx
Earnings Date 7/30/10 (unconfirmed)
Average Daily Volume: 18 million
Listed on 7/10/10