By: Zev Spiro
I hope everyone had an enjoyable Holiday weekend. Below are two new trade ideas. The first is a long in Fortune Brands Inc. (FO), while the next is a short setup in State Street Corp. (STT).
Fortune Brands Inc. (FO): began consolidating in a sideways rectangle (base) pattern two and a half months ago. The rectangle is forming directly below a previous significant resistance level. If there is a breakout and daily close, above $63.50, it would not only trigger a buy from the rectangle pattern, but would also signal a breakout of the significant resistance level.
Chart 1: The weekly chart, on the left, illustrates the important resistance level that FO is currently consolidating below. The daily chart, on the right, outlines the rectangle pattern. Trigger: daily close above the horizontal resistance line, which is $63.50, Target: minimum price objective is 67 dollars, Protective stop: confirmed move back below the horizontal resistance line.
Chart 2: Illustrates the comparative relative strength (RS) of FO versus SPY. A break above the minor downtrend line in the RS of FO would lend confidence to a breakout in the price.
State Street Corp. (STT): ended the intermediate up trend, in January, signaled by a break below the intermediate rising trend line. Recently, a bearish complex head and shoulders reversal pattern triggered, with time confirmation present. Further bearish evidence was presented on Friday, when the 20 day simple moving average (shorter) crossed below the 50 day sma (longer).
Chart 3: The daily chart below outlines the complex head and shoulders reversal pattern in STT, which recently triggered. Also highlighted is the bearish moving average crossover. Target: minimum expected price objective is $42.35, Protective Stops: confirmed move above the neckline.
Updates:
Valero Energy Corporation (VLO) – (Research Report 12/02/10): the price objective of $30 was recently achieved. If one would like to hold some of the position for potential further gains, they could implement a tight percentage trail stop method. Alternatively, use a break of a steep minor trend line as a final exit.
Imperial Oil Limited (IMO) – (Market Letter 1/18/11): Price is approaching the $51 objective. After eight green days in a row, it would be prudent for one to sell a little below the objective, close to the $50 psyche level.
Lindsay Corporation (LNN) – (Market Letter 2/07/11): After Friday’s large move up, trail stops can be raised to 70 dollars.
*DISCLOSURE: Long SPY, Short STT
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