By: Zev Spiro
Markets sold off on heavy volume across the board yesterday. Stops can be trailed lower for many short positions that were initiated over the past month in names such as Goldman Sachs Group, Inc. (GS) and Venoco, Inc. (VQ), (more listed under updates). Below is a short set-up in P.F. Chang’s China Bistro (PFCB), that may trigger soon.
Many of the short ideas I put out over the last month have had the same or similar distribution patterns: a head and shoulders pattern (H & S) or complex H & S. These chart patterns are currently present in many names and once triggered are of the most reliable reversal patterns.
Chart 1: PFCB – The comparative relative strength of PFCB versus SPY broke below major support in January. This may be an early warning to the potential breakdown in the price.
Chart 2: PFCB: The daily chart below illustrates a break of the primary uptrend line, circled, which signaled a major change of the trend. Over the past two weeks the price has retested the trendline from below and it provided resistance. Yesterday the price closed below the 200-day sma and may be close to triggering a bearish complex H & S pattern. The pattern began developing in September 2010. Trigger: Confirmed break of the neckline, just above $45, Target: Price objective is $37.50 measured by the height of the pattern. Protective Stops: Confirmed move back above the neckline and/or a daily close above $48.
UPDATES:
1) T. Rowe Price Group, Inc. (TROW): Market Letter 3/14/11 – one may trail their stop to a close above the neckline, or alternatively, draw a down trend line from the top of the head to the top of the right shoulder and extend down. A confirmed breakout above this line may activate stops.
2) Venoco, Inc. (VQ): Market Letter 3/09/11 – $17.50 level should now act as resistance. Trail stops to a daily close above this level, around $17.70.
3) Autoliv Inc. (ALV): Market Letter 3/03/11 – The target mentioned was $64.50 which is still valid, however, active traders may wish to lighten up close to the 200-day SMA, currently 66.50, and re-short a bounce close to the minor down trend line
4) Triumph Group, Inc. (TGI): Market letter 2/28/11 – Similar to the comments on ALV, the minimum objective mentioned was $78, which is still valid. One may look to book partial profits at the 200 Day SMA, currently 79.92.
5) Goldman Sachs Group, Inc. (GS): Market letter 2/28/11 – Shorts are looking good. It just closed yesterday below the 200 day SMA. Use the minor downtrend line, starting from 2/16, for trail stops.
6) State Street Corporation (STT): Market Letter 2/22/11 : Achieved the objective of $42.35. If one is holding for potential further downside, they could draw a minor down trend line and use a close above as a trigger.
7) Freeport-McMoran Copper & Gold Inc. (FCX) and Southern Copper Corporation (SCCO) Market Letter 2/16/11- One may trail stops to a daily close above yesterday’s high.
Have a great weekend!!
If you are interested in receiving Zev Spiro’s market letter, please email zevspiro@oripsllc.com subject “T3”
*DISCLOSURE: Short PFCB, SPY, TROW, VQ, ALV, TGI, GS, FCX, SCCO
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