I just shorted OSK as 41.73. I am using a mental stop loss at 42.66 and I have a 34.91 objective. I am risking $93 to pick up $682. It is a 7-1 risk/reward ratio.
The reasons for this short are clear.
It is clearly evident OSK is showing that the $40 long-term resistance level is going to be difficult, if not impossible, to break. For the past 4 months, since the stock first reached $40, it has been unable to generate any additional upside above 41.99 even though the indexes have made consistent new highs since then. This week's rally but inability to get above 41.99 suggests that even if the indexes go up a bit more, that the stock will be unable to break the 41.99 high made in November, and even if it does, the 42.56 high seen in May08 will loom imposingly.
OSK is showing a definitive "V" shaped correction with the left cup edge of the "V" being the high seen in May08, at 42.56. That rally top was made after the initial drop from from 65.83 to 34.91. That means that the tops of the edges of the cup can be determined to be 42.56 and 41.99. A drop back down to bottom edge of the cup, seen in 2008, was 34.91. As such, a drop down to that level seems to be a high probability. By the same token, if a break below 34.91 occurs, that would suggest a drop down to the $30 level where decent to strong support is found.
In addition, the NASDAQ has a very very very important resistance level at 2413/2419. A daily and weekly close above that level will put this index into the kind of bull market we have not seen since the Dot.Com rally in 1999. I don't believe the fundamentals support that kind of a rally right now, especially with unemployment still at 9.7% and the housing indutry still in the gutter.
As such, I don't see the NAZ getting above 2419. With today's high being 2402, it certainly means that further upside, more than 17 points in the NAZ, will be very very very difficult to accomplish.
As such, OSK is a strong sale, in my opinion.
My name is Tony and I am a chartist. I have been trading for close to 30 years. In the 80's I was a broker/trader/analyst for Merrill Lynch, Dean Witter, and Pru-Bache.
I offer an inexpensive chart evaluation service on stocks of your choice through membership to my newsletter and message board.
“When or where do I get in? When or where do I get out? What is the trend for the next week? For the next 3 months? Where are the strong buyers and where are the strong sellers (based on past action)? What is the risk/reward ratio on my trade (based on chart objectives)? What looks good right now (chart-wise)?”
These are some of the questions that I try to answer through chart evaluation.
I offer a monthly service that includes a weekly newsletter with chart evaluations on 4 stocks that I believe have attractive chart patterns and good risk/reward ratios as well as 1 chart evaluation per week on a stock of your choice. Evaluations include entry and stop loss points as well as likely objectives. The service also includes membership to a message board where daily updates on all stocks and stock indexes are given. Cost of the service is only $27.95 per month. A 2-week Free Trial is offered. If you want a lesser package, I do offer one for $4.95 that only talks about the Stock Indexes.
If you are interested in learning more about the service, click on my nick and get the website address from the profile area.
I'm curious as to why you are using the NAZ as your key factor in this equation, when it is more of a high tech environment than an industrial.
I'd be more apt to go with the S&P, which most bulls are still giving it a 1200 top before any pullback
Your prediction at 1PM rapidly rose afterwards into the eye of your hurricane prognosis, so we may soon see about your confidence level.
I don't usually use the NAZ as my bellweather but then again this past year the NAZ has been the leader to the upside and the SPX has been the drag.
Nonetheless, the indexes do not go in opposite directions and therefore if the NAZ has found a top, it is unlikely that the other indexes will go "much" higher.
In my chart mention I do state the fact that the DOW and the SPX can actually go higher with the NAZ simply lags behind or goes nowhere.
I can see the DOW getting up to the 11100 level and the SPX up to 1200 while the NAZ stays at this price. That would mean an addition 300 points in the DOW and an additional 30 points in the SPX.
Nonetheless, let me mentions that in 2001/2002 the SPX was unable to get above 1173/1177 and yesterday's high was 1174. Its an "old" resistance and not necessarily something that the traders will respect or follow, but it certainly was a major resistance that year.
In addition, in 2006, the DOW stopped flat cold at 10968 and that is only 70 point higher.
The NAZ is the only index of the three, though, whose resistance is more recent. The resistance in the NAZ is from 2008. In addition, the NAZ is the only index that is presently above the 200-week MA. The DOW's 200-week MA is currently at 11140 and the SPX is at 1225.
Either way you look at it, the indexes are all at very strong resistance levels from the past and don't have much more room, or reason, to go higher.
If they do go higher, then this is the biggest bull market ever! I just don't think that from a fundamental basis it can be.
In 2004 the high of unemployment was 6.3% and even when it topped out at that level, the market corrected 11% over a period of 6 months. In addition, in 2004, the market did NOT have the housing crisis or the banks in such a pickle.
It seems impossible to me that with unemployment at 9.7% and many analysits still saying it is going higher, with housing still expected the decline (no real bottom seen) and with the finance market having their future profit potential cut, due to their inability to speculate or charge feew the way they did in the past, that the market can be in the "most bullish market ever".
Keep in mind that even after the recession in 2001/2002, after the DOW reached a low of 7400 and the SPX at 750, those indexes were only able to rally to 10754 in the DOW and 1163 in the SPX. This past year the DOW got down to 6470 and the SPX to 666 and they have already both gone above the highs seen in the first year of a "true bull market" in 2004.
I just can't see it, both from a chart perspective or from a fundamental basis.
I think the manipulation power has reached the absolute limit to the upside and things will soon start to unravel, perhaps even mmuch more than the 11% correction seen in the indexes in 2004, between March and October.
7 to 1 reward ratio? Your strategy would only be a 7-1 reward ratio if the chance of it going to $42.66 were equal to the chance of it going to $34.91. I don't think so, buddy. Why don't you just say your "objective" is $23.00, then your reward ratio would be 20-1!!!! Wow...
Your answer is facetious or just plain stupid.
Risk/reward ratio is determined by suppor/resistance levels of consequence.
When you see a resistance level (specific price) that has held up for 2 years you consider that resistance, and the support level has also been an important low on 2 separate years (has gone down to that price twice and bounced up), you determine that those two levels are resistance and support.
That means that the probabilities of the stock being sold when the resistance is reached, as well as when the support is reached, are both high.
Anything in between is called a "trading range" where the exact price where the stock trades is somewhat meaningless and dependant on the "mood" of the market.
In simple words, I dare you to make a case for a "specific" price between $35 and $42 that you can defend intelligently.
It is people exactly like you that traders feed on. The ones that don't really know where the stock will be defended by the bulls and the bears.
I would rather follow the big money than try to come up with my own interpretation of the fundamentals. First of all, the reports that you and I and everybody gets normally get factored in immediately and then again, those reports usually don't tell the whole story. Nonetheless, the big traders with the big money, usually have more information about the stock than you or I will ever get.
Follow what they do, and you have a better chance of making money than if you try to come up with the answers before anyone else does.
Good luck with your trading, with that kind of mentality you will need luck to survive.