Kennametal Inc. - KMT - close: 43.64 change: -0.79

Stop Loss: 42.30
Target(s): 49.00
Current Gain/Loss: unopened
Time Frame: up to its earnings report 7/28
New Positions: Yes, see trigger

Company Description

Why We Like It:
KMT appears to be breaking out from a bull-flag consolidation pattern. The breakout actually happened on Friday and today appears to be simple profit taking on low volume. The stock has broken out of a multi-month trading range back in early July. Shares are within striking distance of a new all-time high.

I do consider this a somewhat aggressive, higher-risk trade. More than one of KMT's technical indicators on the daily chart are at or nearing a bearish signal. Plus, the stock has resistance near the $45 level, which is where KMT failed two weeks ago. I suspect the stock will breakout to new highs if the market cooperates but we do not want to hold this position over the July 28th earnings report.

Please note that we only want to open positions tomorrow if both KMT and the S&P 500 are both positive at the open. I'm setting our target at $49.00 but that's way too high given our time frame. We'll just plan on exiting in front of the earnings report. FYI: The Point & Figure chart for KMT is very bullish with an $80 target.

(You could buy calls but the spreads are too wide!)

- if KMT and S&P 500 are positive at the open -

Suggested Position: buy KMT stock @ current levels

Annotated chart:

Entry on July xx at $ xx.xx
Earnings Date 07/28/11 (confirmed)
Average Daily Volume = 826 thousand
Listed on July 18, 2011