The market has all but rolled over today following the jobs data announcement. Though it's likely only a short-term blip, it doesn't negate the need to offset the dip with a few swing trades. Right now, those best bets appear to be Acorn International, Inc. (ATV), China BAK Battery, Inc. (CBAK), Reynolds American Inc. (RAI), and Palatin Technologies Inc. (PTN). Let's review them in depth.
You could consider
Reynolds American Inc. (RAI) the low-hanging fruit of the bunch - this chart has made the slow, methodical arc from a bullish period into what's now clearly a bearish phase.
The biggest worry here is that Reynolds American shares may end up finding support around $42, where a support line currently rest (the line extends back to March's low). That wouldn't be a bad move for RAI, but it wouldn't exactly be exciting either.
We view the more likely landing spot for Reynolds American would be something closer to June's low around $37.00. The stock certainly has that kind of ground to give up following the excessive runup. RAI has a pretty strong options market as well, and the stock's low volatility perhaps makes that a more attractive risk/reward scenario.
If you're a little bit of a speculator, now may be a great time to step into
Palatin Technologies Inc. (
PTN). The stock's been riding a pretty nice support line higher, and has just tested it once again... time to make another big bounce.
The counter argument is that Palatin Technologies shares are also now dealing with a falling resistance line, creating a wedge shape - certainly not the kind of thing to overlook. We don't disagree, but note that the biggest three pullbacks have been on progressively smaller volume, and the PTN bulls have been much more persistent.
We've got no target in mind, but we will mention PTN still has a lingering gap at $1.70, from about two years ago.
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Before jumping on the
Acorn International, Inc. (
ATV) bandwagon, traders should know that today's high of $4.90 probably isn't a coincidence. That's about where the stock has hit ceiling four other times in the past eighth months. ATV hasn't been able to hurdle that mark yet.
That's not to say it will never happen. In fact, we think it will happen. It's just that today's surge has no base/springboard, which usually allows a significant pullback.
If Acorn International can get above the $5.00 level and build a base there (and test it), then we can be enthusiastic. Likewise, if ATV can slide back after today's run and build a base just under $5.00 and then breakout, we'll also be buyers then. Today's scenario though? No - it just doesn't suggest longevity.
Finally,
China BAK Battery, Inc. (
CBAK) looks to be another piece of low hanging fruit. The stock bolted from $3.00 to a peak of $5.22 this weak, but now appears to be crumbling under the weight of its own gains. By the way, this isn't the first time the $5.00 area has been a ceiling; that was a challenging area in the middle of last year too.
Though volume has been light so far today, the move lower was a decisive one. China BAK Battery opened lower than yesterday's close, and has since moved on to under yesterday's low.
As for a downside target, CBAK could make its way back to the previous wedge's centerline around $3.00... or just a hair under it.
If you'd like to know of any changes in our opinion of ATV, CBAK, PTN, or RAI (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.
