Todays Big Stock: Cobalt International Energy, In (NYSE: CIE)

Cobalt International Energy, Inc. is an independent, oil-focused exploration and production company with a salt prospect inventory in the deepwater of the United States Gulf of Mexico and offshore Angola and Gabon in West Africa. Cobalt has a portfolio of 132 identified prospects, consisting of 47 prospects located in the deepwater United States Gulf of Mexico and 85 prospects located in offshore Angola and Gabon. In addition, it acquired a 40% working interest and indicated as operator of Block 20 offshore Angola, on which it had 37 prospects. At the end of 2010, Cobalt had two drilling rigs under contract: the Ensco 8503 drilling rig and the Diamond Offshore Ocean Confidence drilling rig. Cobalt also drilled as operator two exploratory wells and participated as non-operator in three exploratory wells and one appraisal well.

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

After breaking drastically lower in August, CIE has moved into a sideways, consolidation pattern know as a Rectangle. This type of pattern forms when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. The nice thing about a Rectangle pattern is that it will provide you trading points of support and resistance, as well as giving clearly defined breakout and breakdown points. For CIE, the Rectangle pattern formed an $11 resistance (red) and a $9 support (green). 

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 point to get the minimum price objective. For example, since the Rectangle pattern for CIE is $2 high ($11 – $9), CIE should climb to a minimum of $13 ($11 + $2) if it breaks above $11 or fall to $7 ($9 – $2) if the stock breaks below the $9 level. Chart pattern price targets are certainly not guarantees, but they are often fulfilled.

The Tale of the Tape: CIE has formed a very common chart pattern know as a Rectangle. This pattern shows clear breakout and breakdown points for a potential long or short position. The possible long positions on CIE would be either on a pullback to $9, or on a breakout above $11. The short opportunities would be at either $11 or on a breakdown below $9. As always, regardless of entry, stop losses should be utilized.

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: QuinStreet, Inc. (NasdaqGS: QNST)

QuinStreet, Inc. is engaged in vertical marketing and media on the Internet. QuinStreet operates in two segments: Direct Marketing Services (DMS) and Direct Selling Services (DSS). The DMS segment derives substantially all of its revenue from fees earned through the delivery of qualified leads or paid clicks. The DSS segment derives substantially all of its revenue from sale of direct selling services through a hosted solution. DSS revenue comprises set-up and professional services fees and usage fees.

To analyze QuinStreet’s stock for potential trading opportunities, please take a look at the 1-year chart of QNST (QuinStreet, Inc.) below with my added notations:

I like QNST because of the one simple price level at $10. Not only can you see the $10 support (navy) from a few months ago, but $10 has recently started to act as resistance (red) as well. So, the $10 price is key to this stock. If you are bearish, you might short QNST on any rallies up to $10. However, if you are bullish, you would want to see the stock break through the $10 resistance.

The Tale of the Tape: QNST presents a couple of very simple trading opportunities based on its key level of $10. A short position could be entered at the $10 resistance with a stop above that level, or a long play could be made on a break above $10 if that should happen.

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: Stryker Corporation Common Stoc (NYSE: SYK)

For today’s article I thought I’d look back at a previous article I wrote on the stock SYK, Stryker Corporation. Please review this article.

In that article, the recommendation was “a trader could enter a long position at the $45 support or a short position on a rise to $50” or “a long trade could be made if SYK were to break above $50 or a short position if the stock breaks below $45”.

Now, let’s take a look at the updated, 1-year chart of SYK (Stryker Corporation) with my added notations and what has happened since I wrote the article:

First, SYK has continued to maintain its Rectangle pattern. More importantly, did you take advantage of the (2) short opportunities at $50 that occurred over the last (2) months? How about the long play at $45 back in November?

The Tale of the Tape: Just as stated in the previous article on SYK, the stock has formed a very common chart pattern know as a Rectangle. This pattern shows clear breakout and breakdown points for a potential long or short position. For SYK, a trader could enter a long position at the $45 support or a short position on a rise to $50. A long trade could also be made if SYK were to break above $50 or a short position if the stock breaks below $45.

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: McDermott International, Inc. C (NYSE: MDR)

The market has had a challenging week. However, this may have provided the necessary pullback for some stocks if we are to get a “Santa Claus Rally” this year. One stock that has pulled back to a key level of support is that of McDermott International, Inc.

McDermott International, Inc. is an engineering, procurement, construction and installation company. McDermott focuses on designing and executing complex offshore oil and gas projects worldwide. The company delivers fixed and floating production facilities, pipeline installations and subsea systems from concept to commissioning. It supports these activities with project management and procurement services. Its customers include national and energy companies and it operate in most offshore oil and gas producing regions worldwide. MII operates in five primary business segments: Asia Pacific, Atlantic, Caspian, the Middle East and Corporate. Its corporate segment primarily reflects corporate personnel and activities, incentive compensation programs.

To discuss potential trading opportunities on McDermott, please take a look at the 1-year chart of MDR (McDermott International, Inc.) below with my added notations:

The first thing I’d like you to notice is the $10 support level (navy) that I referenced in this article’s title. Counting this week, MDR has had (4) successful tests of this support. In addition, you will notice the important level at $12, which has been both support (purple) and resistance (teal). MDR has tested the $12 level a total of (5) times, so it is an important level to the stock. For future reference, if MDR should ever happen to rally above the $12 level, I have highlighted the previous level at $15 (green) from back in August, September and October.

The Tale of the Tape: MDR currently has (2) important levels to watch: $10 and $12. If MDR pulls back down to $10, traders would want to enter a long position with a stop set below that level. However, if the stock rallies back up to $12, or breaks below $10, you could enter a short play. You could also buy MDR if it breaks above $12.

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: Century Aluminum Company (NasdaqGS: CENX)

Since yesterday’s FSL article garnered so much interest, I thought I’d throw out another stock similar to FSL: Century Aluminum Company’s CENX

Century Aluminum Company is engaged in producing aluminum. The company’s primary aluminum capacity includes the facility in Grundartangi, Iceland with capacity of 260,000 metric tons per year; its facility in Hawesville, Kentucky with capacity of 244,000 metric tons per year; its facility in Ravenswood, West Virginia, curtailed, with capacity of 170,000 metric tons per year; and a 49.7% interest in a facility in Mt. Holly, South Carolina, which provides it with capacity of 111,000 metric tons per year. In addition to the primary aluminum assets, Century has a 40% stake in Baise Haohai Carbon Co., Ltd., a carbon anode and cathode facility located in China. The BHH facility has an annual anode production capacity of up to 180,000 metric tons per year and an annual cathode graphitization capacity of up to 20,000 metric tons per year and supplies a portion of the anodes used in its Grundartangi facility.

Please take a look at the 1-year chart of CENX (Century Aluminum Company) below with my added notations:

Just like with yesterday’s FSL, CENX has seemed to find support or resistance on or at the increments of $2. First, you will notice the previous $14 support (purple) from earlier this year. Next, there is a current topside resistance (red) at $12. Lastly, you can see the common $10 level (blue) and the bottom level of support at $8 (green). CENX shows you how to trade it no matter what direction the market moves. If you like the short side of the market, you could either short CENX on rallies up to a $2 level or on any breakdowns of them. If you want a long play instead, you could buy CENX on a pullback to a $2 level or on any breakout through one of those levels.

The Tale of the Tape: CENX finds the increments of $2 important, currently $8, $10, and $12. If CENX breaks out above $10, you could enter a long position with an expectation of a run to $12. However, if you are bearish on the market and CENX rallies back up to $10, you could enter a short play. You could also buy CENX if it comes down to $8, or short the stock if it breaks that $8 support.

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