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dylan
I would first like to thank Richard for inviting me to be a writer for hedgeagainstspeculation.com. I will try to come on once a week or so to add my two cents to the knowledge pool that he is trying to build. I will usually pick out a couple of stocks from my watch list that I find interesting, and will analyze them, and discuss various entry and exit points. I trade both in options and stocks, and have no problem trading to the downside or the upside. Wherever the price is going, I will be following right behind. And I will try to keep my charts as uncluttered as I can, but I’m not making any promises.
The big question on everyone’s mind is when is this down market going to turn around. I wish I knew, but looking at the S&P500, following Thursday’s action, it looks as if it is coming down to some general support at around 1320 after hitting its head off resistance at the 1350-1360 area. Look for the S&P to test the support. If it holds, I may indicate that the market may be turning from bearish to neutral in the near future. If it breaks through that support, the next two levels of support lie around the 1280 and then the 1250 areas. Breaking the current 1320 support would indicate that we are still in an overall bearish market.
I have several stocks that may be interesting trades. Some will be stronger than others depending on how the market moves. The first is VIP. I was long this stock ever since it successfully tested its $30 support back in mid November. It eventually made up to the mid 40’s before the market started to turn. It successfully tested the $30 support a second time and rose up again. There is a big candle stick on December 11 providing resistance at around $38.50 (I have found that large candle sticks like that, which are formed on heavy volume can often provide new support/resistance lines). The stock now sits at its $30 support. I have two different interpretations of this chart. To the down side, we have a possible head and shoulders formation, with the first shoulder peaking in early November, the head peaking at $45 in late December, and the second shoulder peaking at $38.50 in mid February. If the $30 support is broken on good volume, you can anticipate a move down to $20 over the next couple of months. If the support holds once again, and the stock starts to turn up, it may turn into a channeling stock over the next several months. Look for it to rise and hold above $31.50 for an entry point on this stock. It is also interesting to note, this is the #2 Cell service provider in Russia, and has not been directly affected by the sub prime mortgage mess. I recommend keeping this stock on your list for this reason as well as the fact that it has some well defined support/resistance lines and has some very nice movement. Remember, it’s not the name of the stock that matters, it’s the change in price.
The second stock worth taking a look at is MCK. This stock, like many has been in a downtrend over the past couple of months. This stock has had some nice price movements over the past couple of years, establishing some well defined support/resistance lines at multiple price levels. It is currently forming the trough of a double-bottom reversal pattern in the $51.50 area. Look for this to move up over the next couple of days. A bullish position can be taken if it breaks above the $55 level on good volume, with strong resistance levels at the $56.50, $61, and $62.50 areas.
Other stocks currently on my short list of ones to watch are CELG, DNA, FLS, STP, AYE, AOC, XNPT, LEH, and EBAY. Interesting note, EBAY is nearing resistance at $31.50. Look for it to rebound down off of this and test support at $28.50 for a potential buying opportunity.
Happy Trading
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