Risk and Stability

 | Jul 07, 2014 | 12:28 PM EDT  | Comments
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Writers, commentators, pundits, traders, and pretty much anyone involved with the market will have an opinion. There are going to be different opinions and lots of very bold personalities. Trading requires a certain confidence. Unfortunately, confidence can easily devolve into arrogance. At times, it can be difficult to tell them apart. A difference of opinion can create great debates or petty arguments.

Personally, I don't mind trading barbs, although I hope it is a teaching or sharing moment. I won't hesitate to challenge someone's strategy or someone's claims. My hope in doing so is to learn something myself or open my eyes to other ideas. At the very least, I will challenge my own thinking and strategies.

For instance, I'll be the first to admit I didn't completely agree with Paul Price's strategy on Staples (SPLS) and Coach (COH). But it did get me looking at those names and watching them. Often a falling knife will, at some point, find a floor and a reversal. These are two, along with Rite Aid (RAD) which look to me that they may indeed be there.

COH is one I already hold, but I'm looking to add SPLS and/or RAD here today. The chart of SPLS looks like it has finally outlined the risk, which is a must for me. There is a nice channel for price with a double bottom in place. If SPLS closes under $10.65 then I want no part of a long position. The price here today is attempting a breakout, but not quite there. The short-term moving averages are looking at a bullish crossover, while RSI fights to hold 50. The MFI demonstrates some money is coming back into this name, so a half position here on the stock followed by more around $11.40 looks like the long side play. The risk is about $0.50 to the downside, while the upside offers a bit of gap-fill potentials.


Staples (SPLS)
Source: StockCharts.com


For those wanting a bit more in the way of stability and earnings, then Apple (AAPL) finally looks ready to hit the triple digits. Price is breaking out to new highs here with a measured move right about $100, which ties in well to trader psychology. There is nothing significant about $100 for most other than it is a round number and makes for an easy sell when it comes to rationalizing a move. I'd like to see a better MFI, but volume was way off with the holiday week. The momentum is strong, price breaking through resistance and the short-term moving averages just crossed over in a bullish fashion. Three out of four is enough for me to get involved with a July $95-98 call spread around $1.00 or even just July 19 $94.29 calls if they are out there for you in your comfort zone.


Apple (AAPL)
Source: StockCharts.com


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