I am a short term trader (1 week to 2 month holding time period). I trade soley on technicals. I only trade companies whose shares are above $10, above $500 M in Mkt cap, and are listed on the NYSE. I only make 20-50 trades per year and I only base my trades on the technnicals - therefore I dont care what FCN does. The reason for my purchase today are as followed (all based on price action and technicals):
1. Capitulation : The stock traded 15X AVG volume on Wed and the stock traded its daily average in the 1st hour of trading today.
2. Divergence : Stock was trading -5% when compared to S&P around the opening (S&P up 1% and FCN down 4%) and closed with just a -1.5% divergence (S & P up 1% and FCN down 0.5%).
3.Hammer: This is a price pattern in a stock in which the stock trades significantly lower than its opening yet rallies later in the day to close near its opening (closed 15 cents off its open). Higher than AVG daily volume is needed (3 X daily today).
4. Risk/Reward: The low of the hammer on the day was 30.78. If FCN trades back below this level my trade is a loser and I am down 3%. However most Market Makers take pride in filling gaps, both to the upside and downside. The gap in FCN is from 43 - 36.5 Because the heavy supply of shareholders who bought above 36.5 are not happy, there will be lots of sellers coming into the market if FCN can make it back near the gap down level. With that in mind, I would not expect FCN to fill the gap completely so I would be a seller around 36 - 37 range.
5. RSI reading : Going back past 3 years, only once has FCN been this oversold (RSI of 18).
Good luck to all this is just my reasoning for my purchase today. I have been doing this for 8 years as a side job and win/lose I really do enjoy the stock market. I welcome all counterpoints and agreements.
Today's Grade: C -
The good: Volume continues to diminish (less than 1M shares for 1st time in a week) and the stock made a higher low and a higher high for the 2nd trading day in a row.
The bad: In a relatively flat tape, the stock finished down almost 1%. Also, with the S&P closing just off its high at the close, FCN closed well of its high. With a RSI of 24, the stock is still technically oversold, but that does not mean it can't go lower.
A good day tomorrow would entail a close above 33.
I'm patiently holding. If you take a look at the chart at the last earnings the stock tanked big from about $43 to about the $36in one day, only to rise to almost $46 before the next earnings were out. IMO a hold right now with upside potential outweighing downside risk. I think we will see $40 before the next earnings are out, a nice 25% gain from here. GLTY.
I dont care about billing rates or FCN's biz model. I only care about technicals. At the close of each day I will grade FCN in terms of price action on the trading day.
Today's Grade: A-
1- Hammer candlestick stock pattern from yesterday was confirmed todaywith a long white candlestick
2- Volume has really gone away. From 12 M shares on Wed, to 3M Thur, to just over 1M shares today. This means that most sellers are exhausted and most of the new buyers (30.78 - 32.89) are not going to sell right away. Once you begin routinely seeing this stock trade under 800,000 shares/day, there will be much less volatility, which benefits the new buyers.
3- The day did not look promising at the open as the stock went down right out of the gate, but the stock held above its low on Thursday and it rallied in a relativley flat tape throughout the day well over 2% while closing just a nickel off of its high.
4- This was the fist day in which FCN made a higher low and a higher high in almost 2 weeks. The low Thurs was 30.78, today it was 31.55. The high Thurs was 32.01, today's high was 32.89.
In terms of my position, I was looking to get out around 35-36, but I would become a seller of all my long positions when the S&P reaches 1090 (which is where the downward trendline from May lies). I feel like FCN has room to run, but I do not like holding longs when I feel the general market is going to turn the other way. I also never hold a stock through an earnings release and FCN is expected to have one in a couple of weeks. I will be looking for shorting opportunities at 1090 - 1100, but FCN will certainly not be one.
I welcome all comments and criticisms.
I think FCN has a major problem with billing rates that are far too high to compete. Their business model simply isn't working and, I think, will not work with billing rates far out of line with reality.
During normal economic times this company is "loved".
Now, when companies need to preserve cash, no longer.