Sunday, June 1, 2008

Here Are The Best Longs and the Best Short Possibilities I See Right Now

After going through my scans, what I've done this weekend is try to get myself prepared for anything the market might throw at traders this week. Overall, I am still thinking this oversold bounce will fail soon, perhaps early this week, and the correction we are in will reassert itself. However, I am not married to this idea - I know the market will do whatever it wants. If oil keeps heading lower, who knows how much longer the market will move higher in response. Because of this, here are some of best-looking possibilities on both sides of the market that I see after doing my scans.

The first four charts are all stocks that moved big on Friday. The first two (MRVL and WIND) were both earnings-related, so if the market does decide to follow-through this week, then these will likely be two new leaders. I don't know if I feel comfortable chasing right here however.

MRVL, WINDENER, HXL

Here are the best stocks I see out there right now on the long side. STEC is my favorite due to its excellent fundamentals and a chart that looks like a possible high, tight flag. I would consider taking a good-size position in this, assuming the market cooperates. The rest of these stocks, however, are not perfect - they are just OK. They may move higher, but I don't see any that are stocks I would just load up on, even if we do follow-through.

STEC, ARG, OPTM, SXECYD, HOGS, BMRN, VLNC
VRGY, VLTR, TQNT, AMED

I still think oil prices are going to have a very large influence on the overall direction of this market. If prices shoot right back up toward new highs again this week, and this past week proves to be nothing more than a small, normal pullback, then I just can't see the market breaking out here. I am still short CNQ and long DUG, but really don't have a feeling either way of what they will do next. I am just going to monitor my stop levels and see what happens. The charts below are some possibilities IF (and only if) oil does move higher. The recent momo names have pulled back and could find support where they are now. I would consider playing these for some short-term swing trades IF crude heads higher. If it heads lower, then watch out and stay far away from these.

MXC, PDO, ROYL, FPP
GU, VQ
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

These are the only four shorts I see that look like good risk-reward possibilities here. I do like BOOM here and may start a short position Monday. However, due to the overall lack of short setups, I think a better way to play a move lower in the market would be via the inverse ETF's like QID or DXD.

BOOM, CBI
LNN, ISRG
All Charts from Telechart2007, Courtesy of Worden Brothers, Inc.

Overall, not a lot of clearly bullish or clearly bearish opportunities out there from what I see, so that tells me to still refrain from making any big bets. Right now, I am expecting more downside, but if the market follows-through this week on heavy volume, then I will respect the action and look to the long side of the market only. My guess, however, is that trading will remain difficult, even if we head lower. There are a lot of shorts out there that will likely prevent a really strong downside move. We are also entering the typically slow summer trading season, where trading becomes choppy. Trades can still be entered, and money can still be made in this market, but you have to be very careful and disciplined to do it. I will probably poke at a few trades here and there(STEC and BOOM come to mind), but will also try to keep a lot of cash on hand. That's probably not a bad idea. Best of luck this week.

1 comment:

Mac said...

Sorry, I also wanted to mention OMNI as a possible momo play IF oil heads higher from here. I would and will watch that one in addition to MXC and PDO.