Todays Big Stock: Coinstar, Inc. (NasdaqGS: CSTR )

A stock to keep on the radar today is CSTR (Coinstar, Inc.) Coinstar is a provider of automated retail solutions and one of its core offerings in automated retail include its DVD business, where consumers can rent or purchase movies from self-service kiosks. Another key part of Coinstar’s business is its Coin business, where consumers can convert their coin to cash or stored value products at coin-counting, self-servicing kiosks. As of year end 2010, Coinstar had approximately 30,200 DVD kiosks in 26,100 locations and 18,900 coin-counting kiosks in 18,700 locations such as supermarkets, drug stores, mass merchants, financial institutions, convenience stores, and restaurants.

Before discussing the potential trading opportunities with CSTR, please review the 1 yr. chart of CSTR that I have outlined below, with my added notations:

CSTR has formed a very important level over the last 8 months at $55. As you can see, that level has been tested several times as both support (green) and resistance (red). After moving back above the $55 level in early July, CSTR has been holding support at that level and should be poised to move higher. Also, a lower level worth watching on a break below $55 would be $55 (light blue). 

Depending on when a trader might enter a trade, caution should be advised since CSTR has an earning release on July 28th.

The Tale of the Tape: CSTR has recently broken above a key area of resistance at $55 and is now holding that level as support. A long position could be entered now at $55 with a stop below $55. However, if CSTR were to break back below $55, either now or once their earnings report is released, the next level down for a potential long entry would be $50.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Todays Big Stock: Alcoa Inc. (NYSE: AA)

Well, it’s that time again: Earnings season. Earnings season is always a great time for trading. Volatility on the underlying stock tends to pick up when a company comes out with its quarterly earnings report. Breakouts and breakdowns occur. New trends begin, and old ones end. Yes, this can be a great time for trading. And as always, who kicks off earning season? Alcoa.

Below is a 1 yr. chart of AA (Alcoa, Inc.) with several of my added notations. Please review the chart:

AA had been in a very nice trend higher from August 2010 up until April of this year. After releasing their earnings in April, AA started a trend lower that has now lasted 3 months. AA’s current streak of lower highs and lower lows is still intact, but AA recently took the first step towards ending its downtrend: A break back above the key level of $16. So, with Alcoa set to release their earnings report after the bell today, can AA continue taking steps toward a new trend higher? Or, will Alcoa have another ill received earnings report such as in April and break lower again?

The Tale of the Tape: Earnings season begins today, starting as usual with AA (Alcoa, Inc.), which releases its report after the bell today. Although AA has been in a 3-month downtrend, the stock recently broke back above its key level of $16. If AA were to break back below $16, AA would most likely renew its trend lower and a trader would want to look to enter a short position. However, if AA were to hold $16, and then form a higher high above $17, AA will have broken its trend lower and a long position could be entered. This long position could be entered at the $16 support or upon starting the uptrend above $17.

Waiting for the most opportune times that I have outlined above could provide you with higher probability entry points. No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.

Good luck!

Christian Tharp, CMT

Todays Big Stock: Healthspring, Inc. (NYSE: HS)

With the recent uncertainty in the stock market, I encourage readers to focus on the strongest stocks when given the opportunity. Stocks that have maintained their trend higher through the current market setback will most likely be the ones that hold their ground better during any future pullbacks. Lately, healthcare related stocks have been outperformers. One such stock is that of HealthSpring, Inc.

HealthSpring, Inc. is a managed care organization operating in the U.S. whose primary focus is Medicare, qualifying disabled persons, and persons suffering from end-stage renal disease. HealthSpring operates Medicare Advantage plans in Alabama, Delaware, Florida, Georgia, Illinois, Maryland, Mississippi, New Jersey, Pennsylvania, Tennessee, Texas, and the District of Columbia. It also offers prescription drug benefits in accordance with Medicare Part D to its Medicare Advantage plan members, in addition to providing other medical benefits. It also operates both national and regional stand-alone prescription drug plans in accordance with Medicare Part D.

To review HealthSpring’s stock, please take a look at the 1-year chart of HS (HealthSpring, Inc.) below with my added notations:

As you can see, HS has continued its trend higher regardless of the market setbacks over the last several months. In addition, HS has shown a strong tendency to create important support and resistance levels at the increments of $5, as I have highlighted in blue. This is not an uncommon occurrence among stocks above the $25-30 price range. HS is currently trading above its previously established $45 level, and based on the pattern of HS forming important price levels at the $5 amounts, it could be expected that $50 would be the next level of resistance for HS.

The Tale of the Tape: HS is currently in a strong trend higher. HS also appears to commonly form support and/or resistance levels at the increments of $5. The trades here are clear: If HS were to pullback to $45, or break above its expected $50 resistance, a trader could enter a long position with a stop loss set under the level that was entered at. If HS were instead to turn lower and break below $45, a trader would want to enter a short position with a stop loss set above $45, with an expectation of a drop down to the next level of $35.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Todays Big Stock: EQT Corporation (NYSE: EQT)

EQT Corporation (formerly Equitable Resources, Inc.) is a company that conducts its business through multiple business divisions such as EQT Production, EQT Midstream and Distribution. EQT Production produces natural gas in the Appalachian Basin; EQT Midstream provides gathering, transmission and storage services to independent third parties in the Appalachian Basin. Distribution, through its regulated natural gas distribution subsidiary, Equitable Gas Company, distributes and sells natural gas to residential, commercial and industrial customers in southwestern Pennsylvania, West Virginia and eastern Kentucky. So, there’s a little bit about the company, now let’s look at the stock!

Please take a look at the 1 yr. chart of EQT (EQT Corporation) that I have shown below with my added notations:

EQT has formed a nice up-channel chart pattern over the last 5 months. A channel is simply formed through the combination of a trend line support that runs parallel to a trend line resistance.  When it comes to trend lines, I always tell my students that any (2) points can start a trend line, but a 3rd or more confirms it. You can see that EQT has (4) points of channel resistance (red) and (3) points of channel support (green).  Always remember that after the 2nd test of each of these trend lines, the market decided they were important trend lines, not me.  Following the EQT channel can provide you with both long and short trading opportunities.

The Tale of the Tape: EQT has formed a common pattern know as a channel, in this case, an up channel. A long opportunity could be entered on a pullback to the channel support, which at this point seems to be around $50. Short trades could be entered at channel resistance OR if EQT were to break below the channel support.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Todays Big Stock: Exxon Mobil (NYSE: XOM)

On Friday, Exxon Mobil’s Silvertip pipeline burst upstream from a refinery in Billings, Montana, where it delivered 40,000 barrels of oil a day. Up to 1,000 barrels, or 42,000 gallons, of crude oil flowed into the legendary Yellowstone River before the leak was stopped, according to Exxon Mobil estimates. The initial cleanup stages along the Yellowstone River are now being hampered as rising waters make it harder for Exxon Mobil to get to areas damaged by the crude spilled.

Twice in the last year regulators had warned Exxon Mobil of several safety violations along the Silvertip pipeline. The company decided to restart the line after examining its safety record and deciding it was safe. Then, the pipeline was temporarily shut down in May after officials in Laurel raised concerns that it could be at risk as the Yellowstone River started to rise.

Although Exxon’x recent spill wouldn’t appear to be anywhere near the catastrophe that the BP oil spill in the Gulf was, could the clean-up struggles and potential future liabilities create short-term volatility for Exxon’s stock? Please review the 1 yr. chart of XOM (Exxon Mobil Corp) below with my added notations:

The price to watch on any selling pressure would be the $80 level (blue). XOM usually finds support at $80 whenever above it. Whether XOM pulls back based on the recent oil spill news, or just because the stock has been on a nice short-term run already, $80 should provide formidable support. If not, and the $80 level were to break, XOM could see additional selling pressure.

The Tale of the Tape: Exxon Mobil has been in the news recently due to the rupture of its Silvertip pipeline. This news may have a short-term affect on the stock, XOM. The $80 level should provide support on any pullbacks, thus a long position could be entered. However, if the news were to get worse, and XOM were to break below the $80 support, a short position would be more advisable.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT