Editor's Note:

The market's failure to hold its early morning gains on the debt deal news was a shock for a lot of investors. I know that a lot of traders have exited the market as they wait to see what happens next. That's not a bad plan. There may be a debt deal but it hasn't been voted on in congress yet, nor has it passed.

The S&P 500 saw an intraday violation under its simple 200-dma but it bounced at the exponential 200-dma. This is also a test of its long-term trendline of higher lows. Essentially the market is at support. You have to ask yourself, will you buy the dip to support expecting a bounce? Or do you adjust your strategy and expect a breakdown? While there is plenty of negative economic news lately I am going to argue that support remains support until its broken. Thus we are adding a new bullish trade tonight.

FYI: While looking for candidates tonight I noticed that ATW, MDW, SHOO, and TSU all looked like bullish candidates. Unfortunately most of them have earnings this week. ATW reports on Aug. 3rd. Both SHOO and TSU report on Aug. 2nd. I couldn't find a report date for MDW.

- James


GATX Corp - GMT - close: 39.37 change: -0.06

Stop Loss: 38.15
Target(s): 42.50
Current Gain/Loss: unopened
Time Frame: 4 to 8 weeks
New Positions: Yes, see below

Company Description

Why We Like It:
I listed GMT as a trading idea in my weekend editor's note. Shares held up pretty well today. Traders were buying the dip near $39.00 midday. If the market rallies this week shares of GMT could see a short squeeze. The most recent data listed short interest at 13.6% of the 46 million-share float.

I am suggesting we launch bullish positions now but only if both GMT and the S&P 500 open positive tomorrow morning. We will want to keep our position size small to limit our risk. If the play is opened we'll use a stop loss at $38.15. Our first target is $42.50.

buy GMT if both GMT & S&P 500 open positive tomorrow morning.

Suggested Position: buy GMT stock @ current levels

Annotated chart:

Entry on August xx at $ xx.xx
Earnings Date 10/20/11 (unconfirmed)
Average Daily Volume = 754 thousand
Listed on August 1, 2011