Wednesday, May 03, 2006

Topping Out Retrospective

There are a lot of very toppy patterns in the market. I thought it would be helpful to show some from the past as well to indicate what sometimes happens with these rounded tops.

Take a look back at my suggestion late last year to short symbol FORD. At the time I marveled at how a maker of cell phone covers could be such a white-hot stock (akin to, I don't know, something like NTRI today). The graph below says it all - after a head and shoulders pattern was violated, it collapsed. It's lost about 80% of its value. (Omnipresent reminder: click the graph to see a bigger version, then click Back when done.)


One pattern topping out right now is trendy clothes seller Urban Outfitters. I don't tend to like stocks less than $50, simply because the puts don't have quite as much juice in them. But for a straight short sale, this is worth checking out (symbol is URBN).


On a number of occasions I pointed to Express Scripts (ESRX) as a good short idea. It hasn't fallen as far as the shaded green target yet, but it's well on its way.


Insurance companies have been doing extremely poorly (I have not read the news to find out why). Aetna (AET) for instance got clobbered. Cigna (CI) is also taking it on the chin. I wouldn't short at these levels, but these charts are amazing.


Early last month, I suggested selling Health.net short. This is also turning out fantastic. Just look at it slice through those retracement levels!


Finally, a quick glance at our old buddy Google (GOOG). I'm offering this chart to illustrate once again how the price is clinging to those Fib levels. Even with the big rally a couple of weeks back, the Fib retracement acted like a magnet, and the price is hugging it tight once more.

7 comments:

my2c4u said...

there are 2 markets in insurance. 1 is health insurance(i call healthcare plans), the other is almost everything else, such as casulty...

cristri25 said...

Now, IF the DIA and QQQQ and BRCM will just roll over and play dead ,,,

John Wheatcroft said...

This is the most amazing market I have ever seen. The only way I can make money is to buy stocks at 3:45 and sell them at 9:45. They are at their lowest every afternoon and at their highest right after the open.

I think you bears should think along these same lines. I just don't see any long term gains or losses. Just overnight reactions to the oil and gold market.

Of course whether you are a bull or a bear if you don't have some miners or minerals in your portfolio you are just plain nuts.

Every stick I looked at this evening suggest an up day tomorrow.

costas1966 said...

Every stick that I looked suggest a up day tomorow morning and a down day by the close.

lhast98 said...

I bot a HNT May 45, my first ever put. It is looking good, but doen't trade. How do I get out?

Tim Knight said...

Congrats on your purchase of the HNT 45 put; I presume it's quite profitable now; you mention "it doesn't trade" - the vast majority of options have little or no trading activity, but that doesn't mean you can't get out of the position. It just means it is thinly traded. Placing an order to sell at the market should get you an execution without any trouble.

Bill Shannon said...

Tim,
Thanks for the info on your blog. I have learned a great deal and made some money. How do you determine the target point that you suggest such as on DNA($60)?
Thanks again for the useful info.