Wednesday, April 3, 2013

Wednesday's Breakouts

Wednesday, April 3:

Of 2,399 stocks and exchange-traded funds in this week's analytical universe, 168 that are traded on the major American stock exchanges broke beyond their 20-day price channels, 11 to the upside and 157 to the downside.

Bear market, anyone?

Eighteen survived my initial screens. In descending volume order, they are MTW, SFUN, QLGC, RHP, MPO, UPIP, DIOD, MOD, REE, UGLD, SBND, PSTR, AXX, UBT, MES, SSDL, ESTE and NINI. Only two, MES and UBT, were bull signals; the rest were bearish.

Bear plays have a limitation: They can only be made with stocks that have options with reasonably high open interest or with stocks having sufficiently high volume for a short sale.

I normally wait until the day after the breakout to analyze whether symbols can in fact be traded, but here is a sneak preview:

Four of the bear signals are on symbols trading more than 500,000 shares a day on average: MTW, SFUN, QLGC and RHP. MTW's options grid is limited but has triple-digit open interest near the money in the front month. Short sales would be the only way to play the remaining three.

Practically speaking, I'm guessing that MTW will be the sole symbol worth looking at as a bear play on Thursday, if it is confirmed by trading below its 20-day price channel. Otherwise, the only possibilities will be the potential bull plays, MES and UBT, both with four-digit average volume.

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