8 trading ideas for Tuesday

• December 13, 2005
• Jack Rothstein

Choppy and sloppy. That about sums up the action in the current market as
options are set to expire on Saturday morning and the Fed gets set to raise
interest rates again. I heard tell from an impeccable source that it is
likely that interest rates on fed funds could exceed 5% by the end of the
second quarter next year. Most fed watchers believe that the tightening ends
after the first meeting in March. The market is looking for a 4.75% limit
right now. The economy could grow 3% next year in spite of that. This I
heard from a very smart fellow. The stock market will do well next year as
the current rate cycle closes and a new cycle of rate cuts commence late
next year. Right now the market appears dull overseas as Asia and Europe are
essentially flat. Futures are flat so far this morning. Look for choppy
action. Pick spots in stocks that are expressing good upward bias. I will
get into longs and shorts today and examine the charts and the odds
regarding their usefulness.

U.S Express Enterprises Inc.
(
XPRSA |
Quote |
Chart |
News |
PowerRating) 16.56

It
pays to maintain a discipline and if that discipline is letting the chart
tell the tale and if the view is longer then 10 days then just stay the
course if the trend is in tact. XPRSA is skinny. It will make sharp moves.
It is moving up sharply right now and that is why I am right back into it
after letting it go late last week. The stock broke out yesterday but really
did not have the volume spike that compels greater buying power. It is
coming off a brutal decline. It based for a while and is making its way
back. Ideally it climbs back to the point where it broke down at the 26-27
zones. That is the potential move XPRSA could muster up right now and
wouldn’t that be a favorable gain? So I am back into it. Back into it near
the bottom.

Boeing
(
BA |
Quote |
Chart |
News |
PowerRating) 70.19

A
good day in the market today and BA lifts off and moves to higher zones.
Check out the steady long-term rise expressed in BA. It is currently trading
on all cylinders. It trades above all key inflection points. BA is up over
35% this year and 1.43% in the last 5 days. The chart is solid and that is
the essential reason to own it. It is not extended. The risk is low. Let it
breath with a stop below its 200-day line and sacrifice some near term
performance if it fails up here. Traders that can not tolerate waiting ought
to place the stop at its 10 day line at 69.44.It may be played short,
intermediate or long term. The advance is mature. The stock is not extended.
It is not yet forming a top. It is just in a steady long-term advance that
indicates more upside.

Comverse Technology
(
CMVT |
Quote |
Chart |
News |
PowerRating)) 27.93

A
nice break out the other day in heavy trade and the stock is holding the
line and that is good news and I am compelled to own it and add to it. A
rise above 28.50 and I am all over it. A close above 28.40 is good enough. I
will buy more of it on a pullback into the 26.50-27 zone. That is more
likely in this choppy week and that is a good price to get it. A Santa rally
and CMVT could take off. A gap accompanied the break the other day so it is
actually healthy for the stock to come in a tad and it has been on lighter
volume. CMVT is up 14% this year and almost 7% in the last 5 days so you can
imagine the advance that has shaped up short term. It is currently firing on
all cylinders and is a great stock to be involved in on the long side. Place
the strop at 24.89.

IShares MSCI EAFE Index Fund
(
EFA |
Quote |
Chart |
News |
PowerRating) 60.23

Europe/Asia fusion. The best of both worlds in the large cap space. EFA is
on a roll right now and is one of the larger positions carried in the fund I
run. Markets overseas are performing better then the U.S market right now
and it pays to participate in other environments for the sake of
performance. EFA is up a nice 13% this year. Far better then the SPX or the
NDX. It is up over 18% in the last 52 weeks and 1.89% in the last 5 days. It
is advancing on all cylinders. It trades at its 52 week high. Place the stop
at 56.99 for a swing.

L-3 Communications Holdings
(
LLL |
Quote |
Chart |
News |
PowerRating) 73.19

The
stock is going to get pummeled if it can’t hold 73. That is when I short
more adding to the current position carried. It is on the verge of
confirming the fact that it is in the outset of a new decline. The chart
pattern tells that clearly. A drop below 73 sends the stock reeling into
support at 71. If that fails to hold then selling short is the way to get
the most out of this instrument. Take a look at the chart and see the top
formation segue into a decline. The decline is young. It is just beginning.
It had a stunning run last year. It is flat for the year but down over 2.4%
in the last 5 days. It peaked in at 84.84. Long-term investors should have
sold the stock 5% higher when it dropped below its 200-day line. Its called
risk management. I am selling more short under 73. The stop ought to be
placed at 75.75.

Yum Brands
(
YUM |
Quote |
Chart |
News |
PowerRating) 47.82

Been
involved in YUM on the short side for a while. It is a good stock to sell
short and will be especially compelling if it caves under 46. If YUM falls
below 46 then I am adding to the current position carried. The season ought
to enable the stock to hold for the time being. The trend is taking it
closer to that point. The stock has formed a decent top. The top comes on
the heals of a stunning advance that peaked at 53.79 in June 2005. See where
the stock trades right now and picture the current trend line since that
peak was achieved 5 months ago. That is the top formed. That is the gist of
it. YUM trades below all key inflection points. It is down 2.2% in the last 5
days. The current trend is lower and a close below 46 will send the stock
spiraling to lower price zones. Yum is up a stunning 1.3% so far this year
and 4.45% in the last 52 weeks. A real stunner.

Coca Cola
(
KO |
Quote |
Chart |
News |
PowerRating) 41.15

Did
I call KO a dog the other day? Are all you fans of Diet Coke stunned at my
assessment? I just reflect the truth of the matter. KO is down 1.18% this
year. And up over 3% in the last year. It is flat. It is trending down. In
the last 5 days KO has shed over 3% and is heading to lower points. The
decline is threatening to become more serious. It could drop into the high
30’s where it has support. A drop below 37 on a close and it will collapse.
It pays to be short KO right now and be ready to cover in the high 30’s if
it holds that line of support. Be ready to short more on a drop below 37.
Place the stop at 43.25. A low risk try.

Juniper Networks
(
JNPR |
Quote |
Chart |
News |
PowerRating) 22.46

Take
a close look at the chart and see the reality concerning the odds making
money-selling JNPR short. I say the odds are favorable especially if the
stock drops below 22. That is the signal to get more serious about building
a short position in the stock. The instrument is in good shape to short. The
chart indicates a downward bias at this time. It is in the beginning stages
of a decline and is getting set to test the lows. It has support above 20
into the 21 zones. That support ought to get a test. If it fails to hold 20
then the short is compelling. Place the stop at 24.01 for long term bears
while short-term players may use the 10-day line at 22.86

Futures have turned positive
since the start of this piece and it appears that the action at the open
will be firm. It will be choppy and hard to read. A trader’s nightmare. The
best way to handle it is to pick spots and trust the tape. Let the tape be
your guide. That is the gist of it, as I get ready to pour yet another cup a
tea to settle with into the open. A cup a tea with a touch of lemon to
mellow out in choppy seas and on the horizon the shape of a portly fellow
with a fluffy white beard destined for “Broad and Wall”? A flattening of the
optimistic tone into option expiration is a better set up for a sizzle.
Perhaps.