Todays Big Stock: M&T Bank Corporation Common Sto (NYSE: MTB)

At this point, a rally couldn’t come soon enough. The markets have dropped drastically over the past several weeks and they don’t seem to want to stop dropping, but they will. When? Tough call. However, when the market does rally, it may be short lived. If you missed out on entering short opportunities when the sell-off started, you may want to look to rallies for a 2nd chance.  One stock worth watching would be MTB (M&T Bank Corp).

M&T Bank Corporation is a bank holding company. Through its subsidiaries, M&T provides individuals, corporations and other businesses, and institutions with commercial and retail banking services, including loans and deposits, trust, mortgage banking, asset management, insurance and other financial services. M&T operates in six segments: Business Banking, Commercial Banking, Commercial Real Estate, Discretionary Portfolio, Residential Mortgage Banking and Retail Banking. M&T Bank has approximately 740 domestic banking offices located throughout New York State, Pennsylvania, Maryland, Delaware, New Jersey, Virginia, West Virginia, and the District of Columbia.

Please take a look at the 1-year chart of MTB (M&T Corp) below with my added notations:

MTB has formed (2) very important levels over the course of the year. The first would be the $90 resistance (d. red) and the other would be the very common level of $85 level (green & red). The $85 level has acted as both support and resistance over the entire year.  During the last 7 months, these (2) levels have worked together to create a common Rectangle chart pattern. Like most stocks, MTB broke its key level of $85 and did what one would expect: It went lower with the rest of the market. When the market does finally rally, MTB could make its way back up to the $85 level.

Chart patterns can also provide price targets. Simply take the height of the overall pattern and add or subtract that amount to or from the breakout or breakdown points to get the minimum price objective. For example, since the Rectangle pattern for MTB is $5.00 high ($90 – $85), MTB should fall to a minimum of $80 ($85 breakdown point – $5 pattern height) now that it has broken lower. Chart pattern price targets are certainly not guarantees, but they are often fulfilled.

The Tale of the Tape: After being stuck in a 7-month Rectangle pattern, MTB broke down through its $85 support.  When MTB finally moves higher, possibly after hitting $80, the $85 level should act as resistance. From there, MTB should move lower again, thus a trader would might want to enter a short position with a stop above $85. A break back above $85 would negate the forecast for a move lower.

Side note: If MTB were to break back above $85, a long trade could be entered for a move back up to the $90 resistance.

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: Buckle, Inc. (The) Common Stock (NYSE: BKE)

As you know, the market has had a relatively rough go of it over the past couple of weeks. Most, if not all, stocks have broken key levels and moved significantly lower. However, sell-offs generally don’t last forever. The odds seem to favor that we are getting closer to at least a short-term bounce rather than towards another 7-10 days of selling, although anything is possible in the stock market. In preparation for a potential rally, I believe that now would be a good time to start searching for stocks that may be approaching lower levels of support. One such stock that seems to fit that description would be that of Buckle, Inc.

The Buckle, Inc. is a retailer of casual apparel, footwear, and accessories for both men and women. Buckle currently operates around 420 retail stores in 41 states throughout the continental U.S. under the names Buckle and The Buckle. Buckle offers denims from brands such as Big Star, Big Star Vintage, Miss Me, MEK, Rock Revival, Silver Jeans and Buffalo Jeans. Other brands include Hurley, Billabong, Affliction, Sinful, Archaic, Obey, Roar, RVCA, Fox, and Fossil. The Buckle, Inc. purchases products from manufacturers within the United States, as well as from agents who source goods from foreign manufacturers.

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

As you can see, BKE has continued to trend higher throughout most of the last year, which is somewhat of a bonus compared to most other stocks. In addition, BKE has created important price levels at $40 (d. green) and $35 (l. green) over the last 8 months. Since BKE has been moving lower along with the overall market, the level of $40 is now coming back into play. This $40 level should act as formidable support as it did back in May and June. However, if BKE were to break below the $40, the $35 level would be the next potential level of support.

The Tale of the Tape: BKE has maintained a decent trend higher throughout the market’s recent struggles. BKE has also formed common areas of support and/or resistance levels at $40 and $35. The trades here are simple: If BKE continues to pullback to the expected $40 support, a long position could be entered with a stop loss set under below $40. If BKE were instead to break below $40, one might enter a short position with a stop set above $40, expecting of a drop down to the level of $35. If BKE gets to $35, a new long position could be entered.

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: Moody’s Corporation (NYSE: MCO)

With all the US debt downgrade talk, I thought it might be interesting to analyze the stock of Moody’s Corp, MCO.

Moody’s Corporation (Moody’s) is a provider of credit ratings; credit and economic related research, data and analytical tools, risk management software and quantitative credit risk measures, credit portfolio management solutions, training and financial credentialing and certification services. Moody’s functions within two segments: Moody’s Investors Service (MIS) and Moody’s Analytics (MA). MIS is the credit rating agency that publishes credit ratings on a range of debt obligations and the entities that issue such obligations in markets worldwide, including various corporate and governmental obligations, structured finance securities and commercial paper programs. The MA segment develops a range of products and services that support the risk management activities of institutional participants in global financial markets.

Below is a 1-year chart of MCO (Moody’s Corporation).  Please review the chart with all of my added notations:

Since April, MCO has been holding a very important level of support at $35 (green). Normally, one might expect MCO to bounce on that $35 level again, but instead that level broke yesterday. This break of support is probably not too terribly surprising considering that the stock seemed to be losing steam on each rally up to it’s down trending resistance (red). When a stock breaks a significant support level, traders would expect that stock to move lower, which is what I would now expect from MCO.

 

The Tale of the Tape: MCO had a very important support level at $35 over the past several months. Yesterday the stock broke below that $35 level, thus it should be moving lower. A short position could be entered now with a stop above $35, or a lower risk entry would be on a rally back up to $35, if that were to happen. A break back above $35 might negate the forecast for an immediate move lower.

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: Guess? (NYSE: GES)

Guess? Inc. designs, markets, distributes, licenses apparel and accessories for men, women and children. The company’s apparel is marketed under numerous trademarks including GUESS, GUESS?, GUESS U.S.A., GUESS Jeans, GUESS? and Triangle Design, MARCIANO, Question Mark and Triangle Design, a stylized G and a stylized M, GUESS Kids, Baby GUESS, YES, G by GUESS and GUESS by MARCIANO.

Guess? Inc. lines include full collections of clothing, including jeans, pants, overalls, skirts, dresses, shorts, blouses, shirts, jackets, knitwear and intimate apparel. It also grant licenses to manufacture and distribute a range of products that complement its apparel lines, including eyewear, watches, handbags, footwear, kids’ and infants’ apparel, leather apparel, swimwear, fragrance, jewelry and other fashion accessories. The Company operates in North American, Europe and Asia.

Below is a 1-year chart of GES (Guess? Inc.).  Please review the chart with all of my added notations:

GES has been holding a very important level of support at $38 (green) since the end of last year. No matter what the market has or has not done this year, GES has not broken below $38 . . . until this week.  Something seems to have changed with GES since it has always held $38, but then that level broke. The fact that the stock seemed to be losing steam on each rally (red) was probably a heads up that the stock might be preparing for a break down. Stocks that break significant support tend to move lower, which is what I’d expect from GES.

The Tale of the Tape: GES had a very important support level at $38 throughout the entire year. This week the stock broke below that $38 level, thus it should be moving lower. A short position could be entered now with a stop above $38, or a lower risk entry would be on a rally back up to $38, if that were to happen. A break back above $38 might negate the forecast for a lower move.

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: SPDR S&P Homebuilders ETF (NYSE: XHB)

In order for the economy to ever get going again, the American consumer is going to need to get back on its OWN two feet. Its bad enough to have to deal with issues such as high unemployment and rising gas prices, but the most difficult problem facing consumers may be the constant decline in housing values. Not only does the fall in housing create financial headwinds, but it also creates psychological barriers resulting in a lack of confidence for the future. So the question is this: Is the housing market bottoming, or getting worse? If I trust what the market is telling me, it’s probably getting worse.

The XHB (SPDR Homebuilders ETF) is an Exchange Traded Fund that seeks to replicate as closely as possible the performance of the S&P Homebuilders Select Industry Index (HSII). The HSII represents the homebuilding sub-industry portion of the S&P Total Markets Index. The XHB invests in industries, such as homebuilding, building products, home furnishings, home furnishing retail and home improvement retail. This ETF can be a great gauge into the market’s “view” of housing Please review the 1 yr. chart of XHB (SPDR Homebuilders ETF) below with my added notations:

Over the last 9 months, the XHB has created an important price level at $17 (green). You can see how as far back as November the price of $17 has not only been a primary area of support whenever it is approached, but it was also prior resistance. Last week the XHB broke this key area of support and it did so on a pick up in volume. Volume increases on breakouts or breakdowns add validity to the break. Apparently, the market is sending a message that not only is housing not recovering, but it also may be heading even lower.

The Tale of the Tape: The housing ETF, XHB, has broken its key level of $17. This should signal lower prices for the XHB and probably the housing/real estate industry in general. A short could be entered on the XHB with a stop above the $17 level. Also, traders might want to research homebuilding stocks for potential breakdowns there.

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