An encouraging decision from the Fed today appears to has energized the overall market, but we're still finding more downside trades than upside ones. In fact, three of our four focus stocks today are shorting candidates. Here's a closer look at Frontier Financial Corporation (FTBK), Gushan Environmental Energy Limited (GU), Temple-Inland Inc. (TIN), and Newcastle Investment Corp. (NCT).
The only bullish chart that made our focus list today,
Gushan Environmental Energy Limited (
GU) is starting to accelerate higher, on higher volume. The initial target level isn't overly impressive, but if this move can get some real momentum, that ceiling could be broken.
The key to it all is the range between $1.80 and $2.75. The lower side of that window has been touched twice now, and was responsible for the latest rebound effort from Gushan Environmental Energy Limited. At the current price of $2.01, a move back to the upper boundary at $2.75 would be a decent 36% gain.
What we're really hoping GU does, however, is break past that resistance level - and stay above it (unlike April's effort to do the same). The consolidation since November of last year should have been an ample amount of time to let Gushan build the necessary base.
You can't quite tell it on our zoomed-in version of the
Temple-Inland Inc. (
TIN) chart, but this stock has made a very nice rally since February... perhaps too nice. Though it's not readily evident, the weight of those gains is starting to take a toll.
It's not so much a matter of bearish momentum - or even volume - that's a red flag for TIN. Rather, it's a couple of significant bar patterns that are telling us traders are starting to file out of Temple-Inland... .and it could just be the beginning.
The big clue was the major outside (bearish) day that also happened to mark the top - on the 16th - for Temple-Inland, and the volume spike on the same day also hints of a major pivot. Today's bar is also close to being a bearish outside day, which follows a very weak (low volume) bounce effort on Monday and Tuesday of this week.
Bottom line - TIN is really trying to head lower.
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Congratulations to all the folks who owned
Newcastle Investment Corp. (
NCT) shares prior to the 16th of this month. However, unless you're serious about being a long-term holder, it may be a little past time to head for the door.
Like Temple-Inland, the clues are not so much in the current momentum or volume (both of which were skewed by the monster move), but rather, the shape of the bars themselves. NCT made a doji yesterday, which happens to coincide with the peak following a strong rally. Today's strong move lower from Newcastle Investment is pretty decisive follow-through on the doji/pivot bar. The volume's not exactly light either.
As for a downside target for NCT, the only one that has any real meaning is the support around $1.40. That would mean the stock got cut in half though. Ouch.
Finally, the party looks like it's winding down for
Frontier Financial Corporation (
FTBK)... two days after it started. As is the case with most overbought micro caps that simply get too far ahead of themselves, traders are now mostly interested in locking in their overnight gains. The gap the stock left behind doesn't make things any easier for the bulls.
We'd like to come up with a more sophisticated reason for a likely pullback than FTBK simply being overbought, but sometimes, trading really is that simple. Consider it low hanging fruit.
That being said, we still suspect that the jolt for Frontier Financial Corporation shares earlier in the week will create long-term benefits, not the least of which is investor awareness and liquidity. Hopefully the second wave of FTBK buying is a little more tame.
If you'd like to know of any changes in our opinion of TIN, GU, FTBK, and NCT (or if we officially recommend them as trades),
be sure to sign up for our free newsletter today. It's delivered 2 to 3 times per week.
