Will 2007 Bring Year-End Strength?
This is traditionally the strongest time of the year. What's on your watch list?
Good morning, Minyans.
We are embarking on what is traditionally the strongest time of the year. The odds of a holiday move higher sure don't look good as our technical picture is rather murky at best. However, we can't dismiss any possibility and should be ready for anything.
Futures are pointing to a lower open which will tell us very quickly how many are interested in picking up stocks on further weakness. If buyers step in, I suspect the anxiety over a holiday run may kick into high gear and shorts that have done extremely well of late will seek cover, giving me the spark I need to move. If this doesn't happen, all eyes will be on last Monday's low. If this is broken, a retest of summer lows will be inevitable.
So how do we play it? Well, hopefully by this time you are sitting on a heavy cash position and have your lists ready. I think it is prudent to have both a long and short watch list close by. Here are some highlights from mine:
- Aegean Marine (ANW): The company recently completed a successful secondary share offering in a very tough environment for $37.75 per share. This level should provide decent support for this stock, which is currently sitting in a very attractive high pennant chart formation. I am watching for a high volume move over $40.00 or a light volume move back to the secondary price to start my position.
- Au Optronics (AUO): This is a Taiwanese manufacturer of flat panel displays for consumer electronics. The stock may be held back due to its tie to retail but if one believes the Asian consumer remains strong, this stock may continue to show excellent relative strength. From a technical perspective, the stock broke out of a channel in October and has since faded to revisit what is now trend line support. I am looking to see some signs of stabilization at which time I would consider starting the position with a stop below the 50 day moving average.
- Solars: If the market does heat up, we have to look at high momentum, in particular the solar space. My favorites at present are Evergreen Solar (ESLR), and Memc Electronic (WFR). Both seem to be offering favorable risk reward points for entry and if the market does heat up, should be the first to go. I have been accumulating ESLR but have not yet waded back into WFR. I will do so on a proper set up.
- Men's Wearhouse (MW): I started this short on Friday as the stock broke through support on a bearish wedge. My stop is on a move over the 50 day now as I want to give this name enough room and time to work. I will add to my short on a push through $39.29.
- Guess (GES): It looks to be walking the high wire and tripping up just a bit. The stock has been moving sideways since its break out in May and seems to be flirting with support in the $40.00 area. I am actually interested in starting this short on strength and would look to add when it broke through the November 5 th low of $40.49.
It is early in the game and there is no reason I need to force anything here. I have been very prudent in my dealings with Mr. Market over the last several weeks. When I see the path of least resistance this week, I'll move accordingly. Let the action come to you and let others do the heavy lifting.
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