Good evening. Friday provided no resolution to the sideways channel we have been trading in for the past week. My biggest concern with a breakout higher right now is that it will turn into a head fake because buyers are getting exhausted. The market is in dire need of a healthy correction and I remain in the camp that dips will be bought. If there is breakout to the upside this week prior to a pullback I think it is a good idea to consider closing long positions. The model portfolio has positions to take advantage of a correction and I have provided another short trade tonight that should work great with broader market weakness. We won't open positions until support is broken. In the end, the smart thing to do is to tread lightly and use small position size until we have a better handle on the broader market direction. Please email me with any questions/comments. Enjoy the rest of your weekend.
NEW BEARISH Plays
Temple-Inland - TIN - close 20.08 change +0.45 stop 19.80
Temple-Inland Inc. manufactures corrugated packaging and building products, which the Company considers as two separate operating segments. The Company's vertically integrated corrugated packaging operation includes seven mills and 63 converting facilities. Temple-Inland Inc. manufactures containerboard (linerboard and corrugating medium) and converts it into a line of corrugated packaging. It also manufactures light-weight gypsum facing paper and white-top linerboard at its mill in Newport, Indiana. The building products segment manufactures a range of building products, including lumber, gypsum wallboard, particleboard, medium-density fiberboard (MDF) and fiberboard.
Target(s): 18.60, 18.10
Key Support/Resistance Areas: 20.25, 18.00
Time Frame: 1 to 2 weeks
Why We Like It:
We are back with a short play in TIN after closing a nice winning trade several weeks ago. On 8/31 the stock broke to the upside on heavy volume and has rallied +30% ever since. Over the past two weeks TIN has been drifting higher in an ascending channel on light volume, which is sign this move higher is faltering and built on weak foundation. If TIN falls out of the channel I believe it could create a wave of selling as traders who bought the stock will run for the exits to lock in profits. The stock is also underneath its 100-day and 200-day SMA's. I suggest we initiate short positions if TIN trades to $19.30 which is below Thursday's low and the 50-day SMA. More nimble traders may want to consider a short position at current levels but it is a riskier situation. If triggered, our two targets are -4.5% and -6.5% lower.
Suggested Position: Short TIN stock if it trades to $19.30
Entry on September xx
Earnings: 10/19/2010 (unconfirmed)
Average Daily Volume: 2.3 million
Listed on September 18, 2010