One New Short Position For Monday’s Stock Market Session

February 22, 2008

The late day reversal had a very short-term bullish feel to it and, of course, put tails on almost every stock that qualified for my shorts scans. But there were a few stocks that closed weak and one of them did so from a very bearish pattern where the stock’s price is reversing a breakout from the month before on strong volume. The reversal-breakdown of the breakout that has taken the stock below the 50 and 200 day moving average should be bearish for this stock. Just in case the stock does not breakdown right away, the good news is that the cut loss area is just slightly above where we are going short putting us in a very excellent reward to risk ratio.

new short position: HLEX

HLEX is reversing the January breakout and closing below the 50 and 200 day moving average, on strong volume. The chart has been in a very long topping process that started back in April of 2007. It appeared to want to create another base but the January rally came too far too fast and by the time it attacked the old highs it failed immediately. That reversal on heavy volume led to a short base that is now failing breaking down below both key moving averages (50 and 200) on very strong volume. This is a reversal of the breakout attempt a month ago and with the increase in volume should be very bearish for this stock. It would help if BOP could go red again and if the RS line could lead to the downside but as of now it is weak enough to still be shortable. Cut your loss with a close above the 200 day moving average (you can also use the 50 DMA, if you want to), if the stock does not move lower immediately.