PQE - Like 70% of the companies this past quarter, PQE
had a nice jump on an "upside earnings surprise". What lies
ahead though is is a long term resistance line (pull up a 4-year
chart and draw the down trend line) and, other than the volume
spurt on the earnings report, there has been no follow through
volume. My expectation is that this stock should pull back here
towards the $22 area and then attempt another run to resistance.
If the volume continues to lack, then the short trade looks even
If there's a chance to short this Monday, it would be a good
choice with the idea of taking some quick profits back to the
$22 area and holding some in case it can't muster a rally. If it
does on weak volume, then you can add to the short.
STC - When a company reports record earnings and the
market reaction is to sell it hard, you have to think someone
knows more than you do. Such is the case with STC. Take a look
at this chart.
This may take a while to work down further as I would expect
an attempt for this stock to challenge the recent highs. If
volume doesn't pick up on that challenge, you should consider a
short here as heavy distribution took place on the earnings
UTX - Sooner or later fate will be tempted one time to
many, but that doesn't stop me from betting against what looks
to be good odds. Look at the UTX chart as an example. There have
been a handful of failures at resistance over the past year.
When this happens and we are sitting at that resistance line
again, do you ignore it? Well, you shouldn't. You can play the
resistance line heavily and if wrong, you have a trend line
break that you can cover into with small risk. If it truly does
break higher, then consider reversing as the support becomes
quite formidable at that point.
Is Shorting the Only Option Now?
Lest you think that all I'm considering right now are shorts,
that would not be the case. We have a number of longs on the
books and would buy some more on retraces to breakout areas.
It's just that the resistance areas ahead are so compelling that
it doesn't make sense to not attempt to play them. Sure they
could be broken and if they are, there will be a serious round
of short covering that could drive us higher (and yes, I would
try to cover and short into that euphoria as it begins to look
tired since reading charts is not about a line holding exactly),
but there is a good chance that at least initially, these
resistance areas will prove to hard to break and a retracement
should occur. That's the thinking right here.
Little is the author of TA Today (www.tatoday.com).
He champions the idea that the trading fields are far fairer now
than they have ever been for the small trader and that the
tools, cost structure, and access to the markets requires one to
actively manage their securities and thus their financial
destiny. As an outsider to Wall Street, but with an interest in
trading that spans two decades, you get a different view on what
today's trading landscape consists of and how you can profit by
it. He is the author and presenter of numerous technical
articles both domestically and internationally, primarily in the
field of Telecommunications Quality Assurance.
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