These stocks work for me in both up and down markets
Markets are down across the
globe as the day begins to unfold.
Futures are down slightly and the open will be soft. Major averages are nearing
the 4-year highs again and to avoid confirmation of the current peak of this
market those highs must be crossed. The SPX made its 4-year high on 8/3 at 1245.
The DOW
(
DJX |
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year. The COMP
(
COMP |
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previous highs in heavy trade accompanied by good breadth then this cyclical
bull market that began in March 2003 will live on and provide gains in selective
stocks. There are always stocks that are in rising trends no matter the market.
There are always stocks in a decline no matter the conditions of the overall
market. In the worst bear market 30% of stocks are in an advance. In powerful
bull markets not all stocks rise. Opportunities to be long and short are
constant. Here are several more timely longs and shorts to examine. After
observing the current action in the stocks over 10,50,and 200 days the
opportunities to make money employing them long and short will be clear. The
evidence is in the chart. The chart tells the story about the stock and paints a
clear objective picture. The chart is not an opinion. The chart reflects market
action relative to the specific instrument. Lets take a peak at a few:
Coca Cola
(
KO |
Quote |
Chart |
News |
PowerRating) 44.65
I don’t care if it
is not a sexy choice. A lousy performer over the last 5 years. It is currently
climbing out of a base after it bottomed out back in October 2004 at 38.30. It’s
climbing off the bottom. Its up over 7% this year and is one of the best DOW
performers. I find myself gravitating to big caps right now. The ones that
express favorable technical patterns. I do that to balance out the more
speculative secondary stocks that I am involved in. It is a balancing act. KO is
chosen because the odds favor a solid advance if it can first cross 44.80 on a
close. That is the initial level to pick at the stock. A close above 45.80 ought
to inspire greater confidence and a willingness among big money to get involved.
The stock is close to the initial level of purchase at this moment. I like it
because the risk at this point is low. The same is true about
(
PG |
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(
MO |
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PowerRating). KO is
up over 7% this year easily beating the (drag on the whole market) DOW. It is
only up 5% in the last 52 weeks. It is at the outset of a new advance or will be
if those price points mentioned are achieved. The move into KO is timely. It
doesn’t matter the stock as long as it benefits the stake you have and the risk
is reasonable. KO provides a timely low risk chance. Place the stop at 42.99 for
a trade. Those inclined to invest in KO for the long stretch ala Warren Buffet
ought to place the stop at 40.99.
Integrated Silicon Solution
(
ISSI |
Quote |
Chart |
News |
PowerRating) 8.95
I intend to do a job
on this stock if it can cross 9.15 on a close. That would take out the current
point of resistance That is the place to buy the stock. That is what I intend to
do as I patiently watch it creep slowly up to that important inflection point.
The stock is in the beginning of an advance that has consolidated at current
levels. A move above 9.15 on a close allows it to move to higher levels price
wise. Well that is precisely what you are looking for isn’t it? Stocks that are
at the outset of what could be a persistent and gratifying advance. When stocks
advance they don’t go up everyday. As long as the stock stays above its 10, 50
and 200 day moving averages it is advancing on all cylinders. This stock is
right there. It is not extended. It is up 9% this year and 29% over the last
year and has plenty of headroom provided it can cross 9.15 on a close. It is
moving in that direction and it pays to watch it. I intend to stick in a toe as
it crosses 9.15 and buy it harder at the close when or if it trades above that
level. Place a trading stop at 7.99.
Wyeth
(
WYE |
Quote |
Chart |
News |
PowerRating) 46.51
WYE is a bright
light in spite of the pitiful action displayed by the big Pharmaceutical stocks.
The group is a drag on the market. Poor performance in stocks like
(
MRK |
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(
BMY |
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(
PFE |
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different. It trades in a nice advance and it is a good idea if you do sell
short to have a stock like WYE in place to hedge that bet. If the big cap drug
stocks turn and eventually they will turn then WYE the clear leader of the group
ought to express serious upside movement. The stock is in solid shape. The
technical aspect is showing signs of improvement. The tape is improving relative
to WYE. The stock just failed to hold the high made yesterday. The new high
46.76 now must be crossed to get involved. The stock could be played for the
long term. It requires patience. I intend to build my stake in WYE as long as it
stays above key inflection points. I bought more yesterday adding to the
position I carry. The action displayed yesterday tells of a persistent advance
that has legs. WYE is up over 9% this year and 24% in the last year in a group
that is in shambles. The group is in a bounce adjusting an oversold condition
and stocks like
(
LLY |
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(
BMY |
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(
PFE |
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(
ABT |
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this current bounce. The drug stock to get hold of on the long side and about
the only one that is in good technical health is WYE. The stop ought to be
placed at 42.75.
United Online
(
UNTD |
Quote |
Chart |
News |
PowerRating) 13.25
I am involved in
this stock right now for only one reason. To make money. That is all I care
about. I am using it. I am using it because it is starting an advance that could
be incredible. The reward is too great to let slip by the wayside so I am
willing to take a risk and speculate that this stock will cycle back and fill
the gap that formed when the stock freely fell while in decline a year ago. The
big drop happened in August 2004. It dropped from 15 and change down to 11 and
took over a year to build the base it now advances from. It is a current advance
and a close above 13.35 will indicate further upside as it trends toward its
peak made last year. UNTD actually pays a dividend. The yield is 6%. Not bad.
That is not the essential reason to buy the stock. The stock is in an advance.
It is up close to 15% this year. It doesn’t come close to
(
GOOG |
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more reasonable right now with its technical underpinnings improving if the
stock can cross 13.35 and begin the climb back to respectability. The trading
stop ought to be placed at 11.4
Yahoo
(
YHOO |
Quote |
Chart |
News |
PowerRating) 34.06
YHOO is in decline.
It is down almost 10% this year underperforming the market. The stock is in
trouble and will fail if it drops below 32.70. I will short more at that point.
Shorting YHOO into strength is a good idea as well because the stock is not
overly sold. It is brushing up against key inflection points and that enables
better control of risk. If the stock rallies and rises in heavy volume above key
inflection points then cover the position. I would place the stop at 35.25. The
risk is low in a stock that appears to be forming a major top formation. It is a
stock that is destined to fail. It recovered near a high of 40. It performed
well during the cyclical bull market having risen from a bottom price 4 in
September 01 after 9/11. YHOO is threatening to complete its top and fall. It
pays to eye this one as a money-making short.
EMC Corp.
(
EMC |
Quote |
Chart |
News |
PowerRating) 13.18
I have a big
position in this short right now. I added to the position yesterday. I like the
action because I could trade it. I think that in a weak market this weak tech
stock gets hammered. That is what I observe recently as I watch the action in
the stock. EMC is actively traded and presents a low risk selling short provided
a disciplined approach is taken to cut tight just above the 200 day line. A big
position ought to be trimmed or reduced at the 20-day line above 13.50.The whole
position punted if the 50-day line is violated at 13.80. It is a low risk try.
If the EMC drops below 12.75 its curtains. That is the point where another layer
of shares will be added to firm up the position and really make it worthwhile.
Gerald Loeb, who probably died at his desk a rich old man, said that the way to
survive the battle in the investment trenches relative to equities is to
concentrate big positions in a few stocks and watch like a hawk tightly managing
risk. That is how you win. That is the way to play EMC. Have a tight stop above
the 200 and 50 day moving averages.
General Motors
(
GM |
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PowerRating) 33
If you don’t think
this stock is in decline then I humbly invite you to gaze at a chart. Any chart.
Try a daily chart and see the pattern of despair. See the pattern of
hopelessness that a depressed stock resembles. Turn this instrument into one of
value by selling it short. If you make money from the relationship then it is
very good. The way to make money in GM is selling it short. The risk is low because it trades just below key
inflection points and a tight stop ought to be placed at 35.10.
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.
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