Every stock has a story to tell and I try to listen to each one. Some stocks blare out their stories and you quickly know what is going on. Others take a while to get to know, much like some people.
Albemarle is a specialty chemicals producer. This type of company doesn't draw a lot of attention. After a couple of years of being on my primary watchlist, I was considering removing it. It wasn't regularly generating the kind of movement I like to see. However, there are many different ways to make money from trading.
I noticed something about the stock that got me thinking. In my February 15th, 2013 newsletter, I stated “The interesting thing about ALB’s chart is it makes a move, then goes into a sideways pattern for a few weeks. It has happened several times in the past year, and there are many similar periods in previous years.“
On February 13th, ALB had just jumped again, but the following day produced a lackluster narrow-range day. Sensing it was going into another sideways trading range, I focused on a calendar trade for ALB, using the March and June 65 calls. I set a specific profit target for the trade. ALB did fall into a lethargic trading range and the calendar trade hit the profit target on March 1st, 10 trading days later.
ALB made another sharp move in early June. This time it was downwards. Again, it went into a sideways, nondescript trading range.
After the close on July 17th, Albemarle announced earnings. The stock dropped at the open, but recovered somewhat by the end of the day. The 6 trading days since have been weak, with the possibility of ALB violating recent support.
Albemarle missed earnings estimates by only $0.01, but was off on revenues, continuing its recent track record. So this was not a one-time event that might be quickly fixed.
ALB could once again be entering a sideways period. But the numerous down-close days with above-average volume strongly suggests institutions are unloading their positions.
If ALB breaks below recent support around 61.5, and volume is strong, then ALB should make a good short trade. In a market like this, where buying just seems to come in from nowhere, short trades are higher risk. I would target a small move. Just above the April low, maybe around 58 to 58.5, would be a reasonable target (61.5 to 58.5 would be a 4.9% gain if it worked). If ALB put in a solid reversal, on either the daily or 30-minute charts, I would get out of any short trade.
For the more adventurous a bear put spread could be considered.
In today's full newsletter, I cover exact entry conditions, profit and stop-loss targets on the ALB trades. I also cover a very high probability credit spread trade, a quick-profit bull call spread, and a breakout candidate that bears watching.
Of course, there's much more you need to know and many more stocks you can capitalize upon each and every day. To find out more, type in www.markettamer.com/seasonal-forecaster
Copyright (C) 2013 Stock & Options Training LLC
Unless indicated otherwise, at the time of this writing, the author has no positions in any of the above-mentioned securities.
Gregg Harris is the Chief Technical Strategist at MarketTamer.com with extensive experience in the financial sector.
Gregg started out as an Engineer and brings a rigorous thinking to his financial research. Gregg's passion for finance resulted in the creation of a real-time quote system and his work has been featured nationally in publications, such as the Investment Guide magazine.
As an avid researcher, Gregg concentrates on leveraging what institutional and big money players are doing to move the market and create seasonal trend patterns. Using custom research tools, Gregg identifies stocks that are optimal for stock and options traders to exploit these trends and find the tailwinds that can propel stocks to levels that are hidden to the average trader.
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