Tuesday, November 08, 2005

Two Great Short Ideas

Since this market still can't make up its mind about which direction it's going to go, I thought I'd share a couple of favorite short ideas, both of them in massive head & shoulders patterns. I've mentioned each of these before, but they are both so good, I wanted to revisit their latest charts.

The first, PetsMart (PETM) broke beneath its neckline, took a sharp fall, and then has retraced beautifully to the neckline. This is a gift! It represents a much lower-risk place to put in a short order. Prices don't always return to the neckline, and the stock has already "tipped its hand" about the direction it will probably go. I've put an arrow indicating a target price.

The second, Family Dollar Stores (FDO) is a much, much larger pattern. In fact, whereas the chart above spans five years, the chart for FDO spans a much broader period. In addition to being in a head & shoulders pattern (albeit not as squeaky-clean as PETM), it has broken beneath a major ascending trendline. So you have a breakdown from not just one pattern, but two.

Two reminders - first, you can click on any chart on this blog to see a bigger version; and second, take these suggestions at your own risk! Your own analysis needs to drive your trading. I merely offer these as interesting examples of technical patterns.

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