My 5 strongest setups for today
The current bull market
is in extra innings. It really is over. The major top formation is essentially
complete. The good news
right now is the significant level of pessimism in the air that typically
signals the formation of a bottom and a short-term bottom at that. So the market
is short term oversold and one would expect a bounce to satisfy that and provide
those long stocks another chance to reduce and trim and perhaps let go. The best
strategy to employ right now is to let the market bounce. Trim and reduce strong
stocks as they rally up and begin the process of developing a performance driven
short portfolio. There are many stocks right now that are beginning a decline
and will likely bounce. Be cautious going into the season of strength. We live
in a far different world today then the one of a year ago. A different world
regarding the stock market that’s for sure.
This morning I will get into a few stocks that I
am currently involved in and examine them for a trade. The trade could be short
term, a swing or an actual investment. Right now in this quiet Monday morning a
morning after the Chicago White Sox won the pennant futures point to a soft
open. It is a strange feeling this morning as the White Sox claim the prize. It
is strange that the White Sox won the pennant. It is a strange year. Why do you
expect a great year-end rally when January and April 2005 delivered nothing but
losses? January and April were certainly different this year and so could
November and December. Let the tape tell the tale. Right now in spite of the
modest rally on Friday this current market as oversold as it is remains
vulnerable. Lots of news this week will get a reaction. It will be volatile.
Here are a few stocks long and short. Lets sink teeth into them and see what
kind of performance they may provide going forward.
BE Aerospace
(
BEAV |
Quote |
Chart |
News |
PowerRating) 17.53
I am not involved in this stock. I have been in
the past and made money. I am inclined to watch it. I will get involved in it
again if it crosses 18. As soon as that happens I will flow with the tape. The
tape is positive once again and the stock is in gear. The advance persists with
a rise above 18 on a close. The BEAV is trading up on all cylinders and the
current advance is solid. The stock is up 50% this year and after an
intermediate slump that took it down from a peak of roughly 17.80 in August to
14.30 in late September. The stock is on the rise. It rose above its August peak
the other day and is on the verge of testing the break out and a rise above 18
gives credence to the move. So BEAV is on my radar screen. Trading stop at
15.99.
Boeing
(
BA |
Quote |
Chart |
News |
PowerRating) 67.50
If this stock can cross 68 on a closing basis
then the advance will continue. The stock is in an advance right now that needs
a spark. A close above 68 provides that. BA is up 30% this year and most of the
52-week advance occurred in 2005. They will announce EPS next week. Boeing has
managed to beat street views over the last 6 quarters and will likely best
consensus views again next week. The stock trades as though the report will be
positive. I am angling toward a position. Both BEAV and BA were on the focus
list and could get back on it if the current long-term advance gets legs. The
stock is getting set to attract money after crossing 68 on a close. Place the
stop at 65.99 for a trade.
Cosi
(
COSI |
Quote |
Chart |
News |
PowerRating) 9.98
I am looking to get involved in COSI again. I
backed out of the stock earlier this year after topping out and noticed the
current move and the brisk pace of trade accompanying it. The stock is in a
sweet advance right now. Unlike its main competitor PNRA, clearly in decline
after coming off a stunning advance earlier this year. COSI is a good buy if it
crosses 10.40 on a close. The stock is up 64% this year. It is clearly a market
leader. It is better to buy it into strength. Let the market tell about the
current state of its advance. A rise near term above 10.40 and it is good to go.
I will get involved at that point. Place the trading stop at 9.39 and the
investing stop at 8.99.
Raytheon
(
RTN |
Quote |
Chart |
News |
PowerRating) 36.53
I am short this stock. If RTN rises above 37.50
then I will short more. There is a possibility of that happening because the
stock is currently oversold. If that happens then BA and BEAV are almost certain
to rise above the key points written about and I will be able to go long BA and
BEAV and enhance the short position in RTN. RTN is a good intermediate to long
term short. It currently trades below its key inflection points. It is trading
below all key inflection points and money will be made, serious money may be
made over the next several months being short RTN. It has completed a major
long-term top. It is on its way down. It is currently oversold so sell it short
on a bounce. Sell underperforming stocks short in rallies. This is an example of
one that I am speaking about. Here you have a good long term short that is
likely to net you a gain provided it is played right. Place the protective stop
at 38.70.
Sonic Corp
(
SONC |
Quote |
Chart |
News |
PowerRating) 27.24
I have been short SONC for a while. It is working
out well. It is currently oversold and perhaps a chip or two ought to get
covered. Cover a piece and profit, can’t really hurt. Then short it up again in
a rally up to 29.50-30. That is the essential strategy to employ regarding SONC.
I have already trimmed and will trim more anticipating a rally to satisfy the
current oversold condition of the market. The rally ought to be modest at best.
SONC is the perfect alternative to COSI although PNRA is closer. SONC is an
example of one of many fast food restaurants that will suffer the energy crunch.
Will they pass off higher costs to consumers? That is a question for the fundi’s.
The chart tells me that SONC is in trouble. So sell this oversold stock into a
rally. Sell it short at 29.50 —30. Place the stop at its 200-day line at 31.55.
Futures are currently mixed and near flat. The
week promises some volatility. No question about that. Vulnerable stocks ought
to be sold into strength. Hold only those instruments that are in decent
advances. The rally that began on Friday ought to gather strength considering
the near term pessimism that has evolved. The put call ratio is indicating a
break down in confidence and a high does of anxiety and fear. That is typically
a signal to buy as selling is overdone. The question about the quality of the
rally persists and most technicians are bearish as indicators followed tell a
bearish tale. The current market is bearish. This was not a correction in a bull
market but the start of a brand new cyclical bear market. Never forget that you
can profit in any kind of market. It is a matter of recognizing and acting. I
will be in Chicago if the World Series goes 7 games. One of my close friends is
a lifelong White Sox fan and it would be a delight to be with him win or lose.
No matter what we will be at Uno’s original after the game eating the best Pizza
in the Midwest and drinking beer from longneck bottles. The best Pizza in the
world is located at a place right under the BKLN Bridge. In BLKYN. I will be
there on Thursday night.
Jack S. Rothstein
Rothstein Investment Advisory Services, Inc.
3600 Chain Bridge Road, Suite 200
Fairfax VA 22030
Phone 888-343-4825 — Fax 703-385-7232
www.jrmoney.com —
www.wealthcast.com
Jack Rothstein is the President of Rothstein Investment
Advisory Services, Inc. and is a 20-year veteran stock trader and a money
manager.
Mr. Rothstein also writes Wealthcast, a monthly newsletter about the technical
behavior of the markets. He has been quoted on Bloomberg, CNNFn, the Dick Davis
Digest and the Dow Jones Newswire. Since 1993, Mr. Rothstein also hosted
WealthCast, a radio show in the Washington DC area covering the stock market.