WEEKLY TECHNICAL COMMENTARY: TODAY'S BREAKOUTS & BREAKDOWNS

Tuesday, September 23, 2008

TODAY'S BREAKOUTS & BREAKDOWNS

Today was a continuation of the evening star pattern we saw the past few days. If the market can form higher lows from the start of the morning, then we’ll get a nice bounce the next 102- days. Otherwise, if we see a widening range with the day closing near its lows, then that means the selling for some reason has gained momentum and the continuation downward is highly likely. At this point, most set ups don’t offer me any clues at to probable direction, so we’ll have to see if the higher lows are achieved throughout tomorrow. All eyes on the largest American financial bailout in history.

MannKind Corp. (MNKD) spiked 13% today on “news” that its Technosphere Insulin System is on target for regulating blood sugar in its Type 1 diabetes patients. The CEO mentioned that pre-app meetings with the FDA have been positive and that they expect to ask for approval by the end of 2008. That’s not solid news to me, but it’s all about the perception. MNKD consolidated for one day before hitting a high of $5.25 today before slipping down below the 200-day MA. In any situation, MNKD is bullish and the chart supports it.

Within the past week or so, four law firms filed class action lawsuits against Hansen Natural (HANS) alleging that management issued false and misleading statements. That’s no reason for the stock to jump 6.3% today, but it did break through its August short-term high. I expect HANS to meet the 200-day MA at $34. Notice how HANS is also making higher lows. This is the type of stock you swing trade on for about 5-10 days at a time.

Did you see Jos. A. Bank (JOSB) recently? I added JOSB in my “quiz” on my How to Trade Breakouts and Breakdowns article at $29.89. Well, the stock broke out the very next day and now sits at $39.71. That’s the power of breakout trading. Unless there’s unusual strength, I do recommend scaling out on the breakout and selling as you reach the next consolidation point. JOSB recently penetrate its Sept 07 high and if it breaks through $48, JOSB would reach an all-time high.

American Capital (ACAS) is one of those financials that did not form the evening star pattern like 8-9 out of 10 financials. Instead, the bulls took control yesterday after a day of indecision and continued what they started. ACAS met resistance at the 200-da MA. I expect consolidation or a pullback in the coming days. Note the wide double-bottom as well as the higher low.

Iconix Brand Group (ICON) formed that same double-bottom pattern like ACAS. Notice how the open-close range is getting wider each day, which signals buying momentum. The only concern is the lack of volume to support it. Nonetheless, ICON should be able to hit the 200-day MA.

Dollar Thrifty Auto (DTG) took a 33.8% hit after the company warned that it may threaten some of its financial contracts by the end of the year. Q3 results will also take a hit due to the bankruptcy of one of its tour operators. Rental car operator Avis Budge (CAR) dropped 15.3% on the news. There’s no reason to be long this stock or any stock in the sub-sector and if you do have a reason, let me know.

Chico’s (CHS) got downgraded from “Buy” to “Hold” today by Piper Jaffray and the stock dropped 15%. It appears that CHS formed a breakaway gap which is highly likely to continue to the downside. Any break and close below $5.75 should be noted for a short position.

Pilgrims Pride (PPC) cut another 100 jobs today, in addition to the 600 they already cut. PPC is the #1 chicken producer in the US. PPC broke through a strong 2.5 month support level. The next level is in early 2003 at around $8. I don’t suggest anyone go long PPC…unless they’re forced.

OMGroup (OMG) dropped 10% following the broader market. It is highly likely that OMG will hit the teens very soon given the nature of this pattern. The next support area is at around $20 from early 2006. OMG is a good short candidate.

Cache (CACH) fell to a 5-year low today after management lowered their guidance for the rest of the year. The stock also took two analyst downgrades, making it a very bad day for CACH. CACH dropped so far that I had to circle today’s candle on the chart just in case if you missed it. Next support is at around $5 from 2003.

Paragon Shipping (PRGN) got downgraded today by Dahlman Rose. Diana Shipping (DSX) also got downgraded by the same firm. In fact, the entire shipping industry fell 8-12% today. There is no support for PRGN since its IPO in 2007.