Todays Big Stock: Cliffs Natural Resources Inc Co (NYSE: CLF)

As I’ve stated before, everyone always loves a good Rectangle pattern. Throughout the Today’s Big Stock newsletters, probably the most common pattern discussed is the Rectangle. Traders like these patterns because trading them is very simple, clear and straightforward. The latest Rectangle pattern in the long list I have highlighted would be that of Cliffs Natural Resources, Inc.

Cliffs Natural Resources Inc. is an international mining and natural resources company. The company is a producer of iron ore pellets in North America and metallurgical coal, and a supplier of direct-shipping lump and fines iron ore out of Australia. Its operations are managed into groups: North American Iron Ore; North American Coal; Asia Pacific Iron Ore; Asia Pacific Coal; Latin American Iron Ore; Alternative Energies; Ferroalloys; and Global Exploration Group. In North America, it operates six iron ore mines in Michigan, Minnesota and Eastern Canada, five metallurgical coalmines located in West Virginia and Alabama and one thermal coal mine located in West Virginia.

To review Cliffs Natural’s stock, please take a look at the 1-year chart of CLF (Cliffs Natural Resources, Inc.) below with my added notations:

CLF has been trading within a broad, sideways Rectangle for the last (3) months. Rectangle patterns form when a stock gets stuck bouncing between a horizontal support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. What’s great about a Rectangle pattern is that it not only provides you with trading points of support & resistance, but it also gives clearly defined breakout & breakdown points. For CLF, the Rectangle pattern formed a $74 resistance (purple) and a $60 support (red).

One other thing to notice: CLF also seems to have a common internal level at $65 (green). If the market pulls back in preparation for a move higher, CLF might find support at that $65 level en route to breaking out above $74.

Chart patterns can also provide price targets. Simply take the height of the overall pattern and add or subtract that amount to or from the breakout or breakdown point to get the minimum price objective. For example, since the Rectangle pattern for CLF is $14 high ($74 – $60), CLF should climb to a minimum of $78 ($74 + $14) if it breaks above $74 or fall to $46 ($60 – $14) if the stock breaks below the $60 level. Chart pattern price targets are certainly not guarantees, but they are often fulfilled.

 

The Tale of the Tape: CLF 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. The possible long positions on CLF would be either on a pullback to $60, or on a breakout above $74. (In addition, a long play could be made on a pullback to $65 if one is bullish on the overall market.) The short opportunities would be at either $74 or on a breakdown below $60.  With this type of pattern though, a lot of traders will wait for the break of either the $60 or $74 level before making any trade.

 

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

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: Carrizo Oil & Gas, Inc. (NASDAQ: CRZO)

Carrizo Oil & Gas, Inc. is an independent energy company. Carrizo together with its subsidiaries is engaged in the exploration, development, and production of oil and gas in the United States and United Kingdom. Its operations are principally focused in proven, producing oil and gas plays primarily in the Barnett Shale in North Texas, the Marcellus Shale in Appalachia, the Eagle Ford Shale in South Texas, the Niobrara Formation in the Denver-Julesberg Basin (the Niobrara) in Colorado and the United Kingdom North Sea where its Huntington field discovery was under development during the year ended December 31, 2010. Carrizo controls acreage blocks and utilizes advanced drilling and completion technology along with 3-D seismic techniques to identify potential oil and gas drilling opportunities and to optimize reserve recovery.

To discuss potential trading opportunities on Carrizo’s stock, please take a look at the 1-year chart of CRZO (Carrizo Oil & Gas Inc.) below with my added notations:

Over the last (5) months, CRZO has formed (2) very important levels to watch: First, you can obviously see the $30 resistance (red) level that has been tested on multiple occasions. More importantly, I’d like to focus on the $25 level that has acted as a very common support level (navy), as well as a resistance (l. blue).

Twice over the last (2) months CRZO has closed below that $25 support level (#1 and #2) leading a trader to think the stock was headed lower. However, both times the stock popped right back above that level the very next day negating the expectation for a move lower. On Tuesday the stock closed below the $25 level again, but DID NOT pop right back above the level yesterday. Is it possible that this time CRZO is officially breaking down?

 

The Tale of the Tape: CRZO had been trading mostly between the $25 and $30 levels for a couple of months now. The stock recently closed below the $25 level for the 3rd time, thus leading traders to believe it is going lower. A rally up to $25 would be a great opportunity to enter a short trade, while a break back above $25 would be the time to enter a long position with the expectation of a run back to the $30 level.

 

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

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: Arcelor Mittal NY Registry Shar (NYSE: MT)

Important price levels on stocks aren’t perfect. Stocks can find support and/or resistance anywhere and at any price. However, when writing these articles, I highlight only the levels that appear MORE important than others. Although anything can happen between, above or below these levels, it is at the important ones where the trades should be more probable.

ArcelorMittal is a global steel producer. During the year 2010, ArcelorMittal had steel shipments of approximately 85 million tons and crude steel production of approximately 90.6 million tons. ArcelorMittal produces a range of finished, semi-finished products and flat products including sheet and plate, long products, including bars, rods and structural shapes, and stainless steel products. The company operates in five segments: Flat Carbon Americas; Flat Carbon Europe; Long Carbon Americas and Europe; Asia, Africa and Commonwealth of Independent States, and Distribution Solutions.

Before discussing the potential trading opportunities with MT (ArcelorMittal), please review the 1 yr. chart of MT that I have outlined below, with my added notations:

MT has created a very important support level at $15 (navy) over the last 3 months. In the process, the stock has commonly found resistance at $20 (red). Even though the stock has had other support and resistance points, for example at $17 and $18 (purple), the more important levels have been at $15 and $20. MT is currently trading in between those levels and now appears to be on its way back up to the $20 level.

 

The Tale of the Tape: MT is trading between (2) important price levels at $15 and $20. A rise to the $20 resistance would be a great opportunity to enter a short trade, while a break above that $20 could be a nice long trade. A trader could also enter a long trade on a pull back down to the $15 support, or a short trade on a break below the $15. Everything else in between is noise at this point.

 

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

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: Owens Corning Inc Common Stock (NYSE: OC)

Owens Corning Inc. is a producer of glass fiber reinforcements and other materials for composites and of residential and commercial building materials. The Company’s products range from glass fiber used to reinforce composite materials for transportation, electronics, marine, infrastructure, wind-energy and other markets to insulation and roofing for residential, commercial and industrial applications. It operates in two business segments: Composites, which includes its reinforcements and downstream businesses; and building materials, which include its insulation, roofing, and other businesses. During the year 2010, Owen’s composites and building materials segments accounted for approximately 37% and 63% of its total segment net sales.

Please take a look at the 1-year chart of OC (Owens Corning Inc.) below with my added notations:

Over the last 5 months, OC has formed a very important price level to watch at $30. As you can see from the chart above, $30 was a strong resistance (red) from August through December. Also, prior to breaking above the $30 level in January, $25 (navy) had been a very common level of support.

 

The Tale of the Tape: OC has formed an important price level at $30. A long trade could be placed on any pullbacks to the $30 level with a stop placed under that level. IF the stock were to break below $30, a short trade would be advised in expectation of a drop back down to $25 where a long trade could then be entered.

 

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

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: CareFusion Corporation Common S (NYSE: CFN)

Trading in the stock market can sometimes be complicated. It can also be confusing and challenging to know what trade to make and when to make it. However, there are those trading opportunities that are clearer and more obvious. Usually, the “keep it simple stupid” trades tend to be the best. Although “simple” doesn’t mean that the trade will work out in your favor, at least you knew it was the right trade at that time. A stock that might have made a move that fits that description would be that of CareFusion Corporation.

CareFusion Corporation is a global medical technology company. CareFusion offers product lines in the areas of IV infusion, medication and supply dispensing, respiratory care, infection prevention and surgical instruments. CareFusion’s primary product brands include Alaris IV infusion systems that feature its Guardrails software; Pyxis automated medication dispensing systems that provide medication management and Pyxis automated medical supply dispensing systems; AVEA and Pulmonetic Systems ventilation and respiratory products, and Jaeger and SensorMedics pulmonary products; ChloraPrep skin antiseptic products that help prevent vascular and surgical-site infections and MedMined software and surveillance services, and V. Mueller surgical instruments and related products and services. It operates in two segments: Critical Care Technologies and Medical Technologies and Services.

Please take a look at the 1-year chart of CFN (CareFusion Corporation) below with my added notations:

CFN had been holding a very important level of support at $23 (navy) for the last (5) months. No matter what the market has or has not done since August, CFN had not broken below $23 . . . until last week. Stocks that break significant resistance usually move higher and stocks that break significant support tend to move lower. As an example, notice CFN’s previous level of support at $26 (green). Once the stock broke below that level in August, the stock fell down to the more recent $23 level. In addition, that $26 support ended up becoming a very strong $26 resistance (red), as one would expect.

 

The Tale of the Tape: The trade on CFN is pretty simple: The stock had a very important support at $23 throughout the last several months. Last week the stock broke below that $23 level, thus should be moving lower. The most ideal entry to limit risk would be to enter a short position on a rally back up to $23, if that were happen, with a stop placed above that level. A break above $23 would negate the forecast for a move lower and a long position could be considered instead.

 

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

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