This Setup Has A Defined Stop

  • July 29, 2004
  • Derrick Hobbs


Stryker (SYK)
has been hit over the last 15 trading sessions. The stock is down
approx. 24% over that time frame. Today the stock is down again, for the most
part, in sympathy with the Zimmer Holdings (ZMH) earnings announcement and next
quarter guidance. I’m very interested in the long side of SYK for a swing trade
based on the following parameters:

 

1)     
Solid Fibonacci price support zone
from 42-44.50

2)     
200 day simple moving average is
running through this zone

3)     
I have a Bullish Butterfly pattern
completing into this support zone and as we cross below the 200 day SMA.

 


 

I like this cross below the 200
day SMA for long prospects for many reasons:

 

1)    
weak long hands get out on the cross
down in price

2)    
amateur shorts  step in on the cross
down

 

So, in the event price ramps
back up above our 200 day SMA we have automatic fuel for the “long” fire. The
longs that got shaken out come back in and those that short because we went
below the previous swing low and crossed below the 200 now have to cover (which
means they buy!) So, we have buyers all around the table.

 

What’s nice about the set up is
that we have a clearly defined stop loss, just below the Fibonacci price support
zone. My stop would be at 42.37. My initial objective would be 47.50-48.50 with
my final objective somewhere between 51 and 52.

 

Tear ‘em up!

 

Derrik