Swing traders love stocks like these
I am in a dream and gosh darn
it I just woke up and am here right here now at my key board typing away on this
rainy and clammy fall morning in Virginia. Yucky as the weather is I know that
#812 in the Loews Santa Monica is just a short flight due West. It’s a great
place to be. Simple as that.
Now I am back in the saddle as they say and will
share with you my thoughts about the market after being more then an arms length
from it over the last few days. There is no doubt that the market is broken.
Perhaps there is another modest rally left in it. Irrespective of the market
there are opportunities both long and short. The best way to play it is to focus
on the instruments that are trading in healthy and unhealthy price patterns and
play them long and short. In this piece I will get into a few longs and shorts.
A fresh view. A fresh view of instruments that I
am currently involved in and are especially timely. Going long advancing stocks
that are technically healthy after they come in is prudent. It is also wise to
have open shorts right now considering the bearish feel of the current tape. I
would say that this market is in the outset of a new cyclical bear market. It
will not be as severe as the one that came in 2000 and completed in March of
2003. It will be painful to those that are long only I will tell you that. It is
painful right now to long only players.
The best way to play right now is to be long and
short. It is probably wise to begin the process of reducing long positions and
increasing short exposure. That is the feel of the current tape. All major
market benchmarks trade below all key inflection points. The evidence clearly
favors the bears right now. The season of strength beckons. Perhaps a relief
rally. A relief rally as the season of strength approaches. If the highs just
recently made are not crossed then this is the start of a new bear market that
provides lower price points and new bottoms down the road. It ought to be
exploited. In the worst bear market 30% of stocks maintain rising patterns. It
pays to be selective and try advancing patterns. Perhaps better performance can
be had on the short side of the field. More stocks trade below key inflection
points during bear markets and prudent market players are involved heavier then
usual selling short. Here are a few longs and shorts that provide timely chances
to gain.
Apple Computer
(
AAPL |
Quote |
Chart |
News |
PowerRating) 50.37
A leader. Today it is short term negative. It came in after making a new high
recently and trades right at support. I think it could be played. I am involved
and will watch it carefully today as earnings will be reported after the close.
AAPL is an example of a leader in a rather dismal market. It is extended
long-term. Short term it is oversold. It came in and is at support and earnings
will get some kind of reaction from the players in AAPL tonight . It could go
either way. Much depends on the tone of the call. It is likely to be a strong
holiday season for AAPL.It will be an exciting day within the space of AAPL.
Lots of turning and jockeying for position. The stock is down near 10% after
making a new high on 10/4. That is a dramatic drop and that drop satisfies an
over bought and extended condition. How oversold is it? EPS report tonight ought
to prompt a reaction. I like it at this price. It backed right up against its 50
day moving average. How solid is the support in here? That is the question, and
this evening after the close we will find out. Place stops at 47.99.
Evergreen Solar
(
ESLR |
Quote |
Chart |
News |
PowerRating) 8.15
This is a leader in a bull market within the energy sector. It is a secular bull
market. Remember the crash of 87’? That was nothing more than a cyclical bear
within a secular bull market. Energy has come in and therefore ESLR moved right
along with that action over the last few days and all that happened really is a
chance to get on board and take some shares down in this extraordinary leader
that has come in satisfying an overbought condition. The stock peaked on 10/3 at
9.65. Today it trades at 8.15. It is attractive right now as it tests the break
out that occurred recently. The breakout that occurred in September has been
tested. The advance is solid and is likely to persist. The stock is up 86% this
year and 141% over the last 52 weeks and just came in. It is timely right now.
It is a timely long. Place the stop at 7.19.
Harmony Gold
(
HMY |
Quote |
Chart |
News |
PowerRating) 11.26
From AAPL to ESLR to HMY. Gold is in great shape. The secular bull market is not
limited to energy. Metals are in favor and the secular bull in metals is
persisting. I am building a basket of metal stocks in the portfolio I run. It is
the 3rd position I have taken and will add to the positions currently carried as
time passes. Although the overall market acts draggy and quite shabby, this
stock and others like it are outperforming and providing those involved
satisfying gains. HMY is up 21% this year. Not bad and the advance is really
quite young. HMY is down over 18% in the last year. This is a good stock to
stick a toe into right now and buy more as it comes into the 10 to 10.50 range.
Place the stop at 9.30
Lockheed Martin
(
LMT |
Quote |
Chart |
News |
PowerRating) 60.47
I am all over it after it drops below 59.90. A price below 59.90 is the signal
to short LMT. I am already short RTN. It could be a play on politics. It could
be that the republicans get smashed in the next election and lose congress.
Stocks like LMT and RTN will get smashed and the market is starting to express
concern. Look at the chart and see the pattern as the stock gets set to roll
over. Don’t anticipate. Let it happen and when it does then simply sell LMT
short. A drop below 59.90 is the signal to sell. RTN is good for a bounce up to
the 38-39 zones and it is at that level to add to the position. Place stops at
the 200-day line.
Advanced Medical Optics
(
EYE |
Quote |
Chart |
News |
PowerRating) 35.45
EYE is in fine shape. Very fine shape. If you are short. It is working out fine.
It really broke yesterday in heavy trade and the decline is gaining momentum.
Look at that lovely chart. Just gaze at the chart for a moment and see what I
see. EYE is in the beginning of a decline that is coming off a major long-term
top. It is moving into stage 4. It is a timely short. Place the stop at 39.50.
Analog Devices
(
ADI |
Quote |
Chart |
News |
PowerRating) 33.02
A smart intern that I have working with me turned me on to ADI. He enjoys
walking on the dark side. I am long a number of semi conductor stocks right now
and this one is a modest hedge as it is working out nicely. Short it on a
bounce. It is currently oversold. I don’t have enough short positions to hedge
the semi conductor holdings. It is because I am bullish on the group. It is the
season for the semi’s to come in before the rally gets set. They typically rally
into the New Year and peak. This stock just dropped dead. It happened yesterday.
It is right at another support level. A drop below 33 on a close and the decline
gets serious. It bottomed in October 2002 with just about everything else at
17.88. It is heading in that direction. It peaked at 52.37 most recently. It is
struggling right now and a break below 32.56 and it is curtains. I am short
damaged goods. It is good to get short goods that are damaged. Place the stop at
37.10.
I am used to the Yankees not being in the World Series. It is where they belong.
Smitten by Angels again. Too bad. Hats off to the Angels. I think I am going to
move to LA and be an Angel fan. No. Just kidding. I am in post play off
depression right now as the Yankees failed again. So lets see if we could bounce
today after the miserable display over the last week. Futures are up but off
there highs. Not bad. Same as yesterday. Semi conductors are oversold and ought
to bounce. Perhaps we are in store for a modest bounce in the action today. It
is good to be back in familiar territory. I will be in NYC next week and you do
know what always happens when I ride up to NYC either in a car or in a train?
What happens is a rising market. I go up once a month. The train is better cause
it gives me a chance to catch up on very good reading material. I pour over the
research on trips up north and get deeper in touch with reality. Its really what
its all about, isn’t it?
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.