February 25, 2013 (6:00 pm)
We’ll discuss our views on the broader markets in a post to follow this one. In the meantime, let’s get to some specific stocks.
Apple. Honestly, we don’t have much to say here. But we know many of our readers are long-time Apple investors. The shares are nearing oversold conditions, but have some room to the downside before hitting a near-term RSI level (17-20) that typically precedes a rebound. Further, the shares are sitting between two significant trend lines and don’t have firm support until the $435 level (it’s previous low and blue trend line).
Boeing. Shares of BA were firmly rejected at the upper trend line of a symmetrical triangle it’s been forming over the past two months. It is now sitting in no-man’s land, equidistant from the top and bottom trend lines and almost exactly at neutral RSI. That said, it’s Chaikin Oscillator is nearing oversold levels. We don’t have an advantage trading the shares here, so we’ll be watching how the triangle develops over the coming days.
Broadcom. Shares of BRCM formed a well-defined rising wedge over the past four months. The shares broke down four weeks ago, and have since re-tested (and been rejected at) the bottom trend line. Further, the RSI and Chi-Osc are relatively high and provide plenty of room to the downside. The wedge has a target move of $4, so the implied target price is $31. However, it has some support at the $32 level, which will be important to watch. We may jump in on the short side (or with puts) on a near-term rebound.
Berkshire Hathaway. Shares of BRK.B have formed a sort of rising broadening wedge. The wedge consists of two fairly well-defined trend lines that have formed over the past six weeks. The shares are sitting squarely at the lower trend line just as the RSI and Chi-Osc are hitting/nearing oversold conditions. This is a very likely candidate for a bounce here.
Netflix. NFLX has both beaten us up and provided very lucrative profits for us over the past four months. The momentum is so strong in this one that you need to tread carefully. At this point, the shares look to have formed a well-defined rising wedge since its earnings announcement gap up. It did so on declining RSI, forming negative divergence. We took advantage of the initial uptrend ($175 calls) and made a 46% profit intra-day. A very successful trade. On the other hand, we got bearish too early with $175 puts and lost 17.5% over the course of two weeks. Overall, we made 27.4% between the two trades. At this point, the shares are coming off overbought conditions (RSI and Chi-Osc) as they break down from the rising wedge. The target move is roughly $35, implying a target price of $155. We’ll be looking to enter a bearish trade during the next bounce.
Blackberry. Speaking of momentum stocks, let’s take a look at BBRY. The shares more than doubled in just a few weeks earlier this year. They’ve since formed a symmetrical triangle, which looks an awful lot like a bull flag. However, since this is a momentum stock, and the momentum is waning, the supply/demand of shares is beginning to favor the bears. The triangle has broken slightly to the downside. We’re not ready to call it a true breakdown yet, but are watching it closely. The triangle has an implied move of $6, which will be a lucrative opportunity if you can catch it.
SodaStream. Shares of SODA have broken down from a symmetrical triangle. Like BBRY, this symmetrical triangle happened after a sustained rally, making it look like a bull flag. This may be what BBRY looks like if it breakdown down. The target move of the SODA triangle is roughly $8, implying a target share price of $42. However, there looks to be some support at the $44 level. Further, the shares are nearing oversold territory. Therefore, the risk/reward characteristics may not support a trade with the current set-up.