Ticker symbols mentioned in video: BNNY DF GNC HAIN LWAY SMBL TFM VSI WFM
Comments »Back from the Dead Money?
When you see some of the technically-damaged charts like LULU bounce strongly today, it s a good reminder of how deceptive it can be to try to short when the 200 day moving average is still rising on the major indices. It almost does not seem fair to the shorts at times, as the still-solvent ones have patiently waited for textbook bearish setups throughout the uptrend of the first quarter of this year. However, the market can often be a cold-hearted beast, with no regard for who deserves what.
As such, we are seeing some laggards start to play catch up with the recent rally, including CRM DECK NFLX and even GMCR. That does not mean that those stocks are high probability long swing trading setups. In fact, I would argue that they are not. However, agile and precise traders can knock out a few points in them with risk pretty well-defined.
On that note, have a look at some of the casino stocks, which have basically been dead money for quite some time. LVS and WYNN have very similar charts, as stop-losses can be placed below today’s lows as they try to hammer out a bottom. They are not the best of the best setups, but in this tape they have a good chance at attracting a rotation. Also have a look at slot machine maker BYI.
Once again, we are still in a holiday trading week, which means volume stays very light and bears probably wait for a better spot to reload shorts.
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Another Idea for Holiday Trading
The airline, JetBlue Airways Corporation, is another example of the type of heavily-shorted stock that has potential to see some hot action during a light volume, holiday week of trading. We know that oil prices are well off their annual highs (major input cost for airlines), which could easily propel the stock even higher. Beyond that, though, I am more impressed with the technical base the stock has formed just under resistance, with its 50 and 200 day moving averages now torquing up. Clearing $5.40 and especially $5.50 will likely set the squeeze in motion.
Earnings are scheduled for 07/23.
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Turning to Fine Literature and Poetry
Headed into a holiday-shortened week after a stunning upside reversal last Thursday and Friday, I would not be surprised to see a bevy of low float, heavily-shorted stocks see some good action. Seeing as many varsity institutional traders are away from their desks on holiday, when the cat’s away the mice will play.
One of the better-acting stocks throughout this correction has actually been Barnes & Noble, Inc.. I know all of the arguments for why the bookstore businesses is as dead as disco, but the stock has reacted very well in consolidating its huge gains at the end of April on the back of a partnership with MSFT (as well as a hedge fund taking a major stake). The chart has both a rising 50 and 200 day moving average, saw an uptick in buy volume on Friday, and is loaded with shorts to squeeze.
No position yet, but I am stalking on strength.
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Checking Out These Ideas
If the bulls can build on Thursday’s intraday reversal, I think DF and GGP have displayed enough relative strength during this correction to be considered long setups. Of course, breakout plays usually need the broad market to be at least tame if not outright bullish, so paying attention to the indices remains important.
I also think KWK could work as a short setup, if only for a quick trade. The stock has seen a very sharp rally and may very well have put in a good bottom. However, it remains in an overall downtrend and should shake out the hot money here for a bit, especially after Thursday’s candle.
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Small Cap Casual Dining for…the Win?
While the likes of CMG MCD PNRA SBUX and YUM are merely trying to base out or stabilize after the recent sharp correction, a surprising number of small-cap casual dining stocks are either breaking out to new highs with strong buying volume, or are seeing very intriguing signs of accumulation. Have a look at the weekly charts below. The outperformance is breathtaking, consider the 11% broad market correction we just saw. Be careful with market orders on some of these, as they tend to trade thinly. Again, we are talking the baby caps here.
My best guess is that we might be in store for a series of mergers, acquisitions, and leveraged buyouts in the space. Either that, or there really is a flight to U.S. markets away from the rest of the world, since the stocks below are much more levered to America than international powerhouses like MCD and YUM.
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