For This Stock, I Favor The Short Side
Based
on the various time frames of Cigna (CI) and my technical analysis, I
am favoring the short side of this company over the coming months.
First, let’s look at the weekly
chart below. This chart, going back to 1999, illustrates a very large time frame
head & shoulders pattern that developed over 3 years. Now, after close to a 3
year rally, CI is testing the neck line of that pattern for the first time. Also
take note that I have a large Fibonacci resistance zone from 97-114. so, I think
this 3 year rally is about to wrap up and we are going to move into a volatile
situation that will likely lead to downward pressure on the stock. If you’ve
been a longer term owner of this one and have had the good fortune of riding
this wave. Say thank you and call your tax man or woman…because you should be
generating some long-term gains right here.
Now, to further confirm our
weekly chart, take a peak at this same weekly chart but only analyzing the
uptrend that began back in November 2002. I’ve overlayed a 2 standard deviation
regression channel and find that the stock is sitting at the top of this channel
and if going by history we have a 15-30% downside risk in the company from these
levels.
Now that we’ve established the
weekly time frame is approaching reversal territory, my job is to find a daily
trigger to confirm a short entry. I favor pattern recognition for triggering an
entry. So, as you look at the daily time frame below, the stock has printed a
bearish Butterfly pattern at the top of our weekly channel and Fib price
resistance.
Finally, for giggles (not
googles), check out the 60-minute chart. Do I wonder if this 97 to 100 level is
critical for the stock…just look at what prices have been doing for the past
couple of days. This consolidation would make me a little queasy if I were long
at these levels.
So, long should be getting in
the mindset of trailing up stops and taking profits, while you short feeders
should be getting your mind around a good swing sale opportunity.
Take care everyone!
Derrik