January 9, 2012 (3:20 pm)
We’re in the process of designing a more efficient way to update our thoughts on individual stocks. In the meantime, we wanted to share some charts and our expectations on price action.
Apple is forming a symmetrical triangle here. As we’ve discussed in the past, symmetrical triangles are continuation patterns, so the bias is to the downside. We may not see a major move until earnings.
Bank of America has formed a well-defined rising channel since early November. We shorted the shares as it broke the lower trend line at $11.85 this morning. The shares are becomming oversold, so we may see a small bounce or consolidation to back it out of the very low RSI, but will likely see lower prices ahead.
Berkshire Hathaway is a bit more challenging. BRKB formed a pretty clear bull flag (or a falling wedge, but both have a bullish bias), indicating higher prices ahead. To contradict that bullish bias is a potential double top around the $94 level. We’re holding our bearish positions for now, but will exit our positions if the shares rise above the $94.50 level. For now, we continue to expect a re-test of the upper trend line of the multi-week rising channel (blue line).
Chipotle has formed a rising wedge since mid-November and fell below the lower trend line this morning. We took a bearish position in the name at $295.31 and expect lower prices ahead.
Fusion-IO experienced a steep sell-off over the past week. We took a long position at $19.25 this afternoon as it reached oversold conditions on both the RSI and Chi-Osc. It is also trading well below its lower Bollinger Band. We expect the shares to eventually rebound and retrace at least 50% of the recent sell-off. There may be slightly lower prices ahead before it stabilizes and reverses, but we’re OK waiting with a small long position in the meantime.
Starwood Hotels, like many of the other stocks discussed here, also formed a rising channel since mid-November. As it tested the upper trend line on overbought conditions, we entered a bearish position. As it backed off those levels, we closed our HOT put position, but are holding onto the short positions we purchased.