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

Todays Big Stock: Halliburton Company (NYSE: HAL)

Honestly, I really enjoy analyzing stock charts. The price movement of a stock can tell you so many things. Between important price levels, chart patterns, breakouts and breakdowns, there are just so many good trades to be made. However, you do have to wait and make the right trade. The right trade can be easily identified if you have the right . . . . chart!

So, please take a look at the 1-year chart of HAL (Halliburton Company) below with my added notations:

HAL has created a common chart pattern known as a Rectangle. A Rectangle pattern is simply formed when a stock gets stuck bouncing between a support and resistance. A minimum of two successful tests of the support and two successful tests of the resistance will give you the pattern. The great aspect of a Rectangle pattern is that it will provide you with clearly defined breakout and breakdown points. In the case of HAL, the Rectangle pattern has formed a $51 resistance (red) and a $45 support (green). If HAL were to break above $51, higher prices should result. On the flip side, if HAL were to break below $45, lower prices should follow.

Another useful tip with chart patterns is their ability to 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 HAL is $6 high, if HAL were to break above $51 a trader would expect HAL to climb to a minimum of $57. Chart pattern price targets are certainly not guarantees, but they are often fulfilled.

The Tale of the Tape: HAL 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. If HAL were to break above its $51 resistance, a trader could enter a long position in expectation of a run to $57. On the other side, if HAL were to turn lower and break below $45, a trade would want to enter a short position with an expected drop to $39.

Other potential trades: A long position on a pullback to the $45 support, or a short trade at its current resistance of $51. However, a stock near its 52-week high such as HAL might not be the highest probability short trade.

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