Stratasys Offers an Inviting Pullback

 | Jul 10, 2013 | 7:00 AM EDT
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I like this pullback in Stratasys (SSYS) for a buy for a few reasons. First, I have higher targets based on the current pattern of this stock. If the current pattern remains intact, the first meaningful upside targets in this one come in at the $100.44-$101.03 area.

The swings that identify these targets are labeled on the daily chart below. For the bullish pattern in Stratasys to remain intact, price needs to hold above the $77.79 swing low.

Second, price is above the 200- and 50-day simple moving averages, and it's still on a "buy," with the 5 ema holding above the 13 ema. These averages are technical "filters" I like to use that support this bullish scenario. Third, I have two Fibonacci price cluster zones that include symmetry projections. They come in at $85.12-$87.54 and then $82.15-$83.98. If Stratasys is going to continue higher, I would like to see it hold above one of these zones.

Remember that the markets will typically ebb and flow. After the recent pop in this stock, up to a 1.618 extension, you can see the pullback zones that I've projected from that recent high. Rather than buying new highs like we saw a couple days ago, a better way to go, in my opinion, is to keep the edge by buying the pullbacks after the new highs. So here we have a pullback that looks very interesting to me, with the risk pretty well defined.

Bottom line, I am long a call spread in this one, looking for that $100 area target. I will consider myself wrong if the second price cluster identified on this chart is taken out on the downside.

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