Fibozachi Forecast: Week of April 12th

Short Trade Candidates

GNW: Genworth Financial (Intermediate-Term to Long-Term)

Current Price:  18.31

Candlestick Patterns:  Bearish Harami & Doji

Interestingly, when GNW IPO’d back on 5/28/04, it put in a weekly low of 18.75 that held for years.  Since then the 18.75 – 20.00 level has acted as both support and resistance on multiple occasions.  GNW has now failed to close over 18.75 for the last two weeks, despite briefly trading above it.  From its picture-perfect FNL (Failed New Low) in early March ’09, GNW has now rallied over 2,300% from 0.78 to 18.84. This is a long-term trade that will likely take weeks to play out, where the 16.5x level provides a confluence target for a fueling zone that sends GNW back to test support at 10.50 – 13.68.  While any move over 18.75 could easily retest round number 20, nimble option traders would be wise to watch the short-term inflection levels of 18.75 and 16.56 for quick bilateral setups.

Entry:  Immediate (with daily confirmation) or with a move below 17.78

Target (Long-Term):  10.50 - 13.68

Stop-Loss:  18.72

Potential Risk:  $0.94

Potential Reward (Long-Term):  $4.10 - $7.28

Risk: Reward Ratio:  1: 4.4 - 1: 7.8

LNC: Lincoln National (Short-Term to Long-Term)

Current Price:  31.47

Candlestick Patterns:  Doji & Filled White

Measured from the 59.99 peak (9.19.08) to the 4.76 trough (11.20.08), LNC reclaimed 50% of lost territory this past week at the 32.38 level.  Plotting a Doji & Filled White weekly candlestick into a long-term inflection magnet at a 50% price retracement, LNC’s rally appears to be waning.  Last week’s high of 32.54 narrowly missed grabbing the weekly 144-EMA (at 32.77), which had repelled price action from 55.79 back on 9.19.09.  An Elite Oscillator™ daily sell signal that registered on the 7^th (32.14 intra-day high) alongside 4.8 million shares traded has yet to be repealed by either price or volume.  LNC appears poised for a pullback, though our long-term targets won't be hit for several weeks if volatility decreases.

Entry:  Immediate (with daily confirmation) or with a move below 30.67

Target (Short-Term):  28.44

Target (Long-Term):  23.68 - 22.52

Stop-Loss:  32.55 or higher

Potential Risk:  $1.88

Potential Reward (Short-Term):  $2.23

Potential Reward (Long-Term):  $6.99 - $8.15

Risk: Reward Ratio:  1: 1.2  &  1: 3.7 - 1: 4.3

PFG: Principal Financial (Intermediate-Term to Long-Term)

Current Price:  29.30

Candlestick Patterns:  Bearish Engulfing

PFG’s weekly candlesticks are simply screaming exhaustion.  The week of 3.19 plotted ‘3 White Soldiers’ and ‘3 Identical Soldiers’ patterns (think 3 large, wide-range, connecting real bodies); the week of 3/26 registered another ‘3 White Soldiers’ pattern; the week of 4/2 registered ‘Deliberation Bear’ and Doji patterns; and last week plotted a Bearish Engulfing candlestick.  The chart below clearly shows how the last 2 weeks have resulted in a narrow-range consolidation that is much more likely to precede a pullback than another push.

Entry:  Immediate (with daily confirmation) or with a move below 28.84

Target (Short-Term):  25.75

Target (Long-Term):  22.04

Stop-Loss:  30.88 or higher

Potential Risk:  $2.04

Potential Reward (Short-Term):  $3.09

Potential Reward (Long-Term):  $6.80

Risk: Reward Ratio:  1: 1.5  &  1: 3.3

RDC: Rowan (Short-Term to Long-Term)

Current Price:  29.94

Candlestick Patterns:  Filled White

Last week RDC hit a key level of prior support between 30.00 - 31.00, which we now expect to morph into resistance that will halt the rally for at least a few weeks.  RDC has been nice and volatile over the last 8-12 weeks and we're hoping that it will continue, enabling us to catch a worthwhile move in a relatively short period of time. 

Entry:  Immediate (with daily confirmation) or with a move below 29.33

Target (Short-Term):  27.24 - 25.92

Target (Long-Term):  21.21

Stop-Loss:  31.03 or higher

Potential Risk:  $1.70

Potential Reward (Short-Term):  $2.09 - 3.41

Potential Reward (Long-Term):  $8.12

Risk: Reward Ratio:  1: 1.2 - 1: 2  &  1: 4.8

IBB: iShares Nasdaq Biotechnology (Short-Term to Long-Term)

Current Price:  91.98

Candlestick Patterns:  Doji & Filled White

After plotting a Shooting Star pattern the week of 3/26, IBB has floated sideways and plotted consecutive Doji candles.  Spanning back to 2006, it has twice failed to penetrate an upward sloping trendline of resistance that currently measures out to 95.  While volatility has died down over the last 4 weeks, if IBB cracks here and fails to hold above 90.00 - 91.00 then it will rocket higher.  It is unlikely that IBB will drop below the 86.00 support level without bouncing feverishly over several weeks.

Entry:  Immediate (with daily confirmation) or with a move below 90.98

Target (Short-Term):  86.00

Target (Long-Term):  80.08

Stop-Loss:  93.55 or higher

Potential Risk:  $2.57

Potential Reward (Short-Term):  $4.98

Potential Reward (Long-Term):  $10.90

Risk: Reward Ratio:  1: 1.9  &  1: 4.2

EMR: Emerson Electric (Intermediate-Term to Long-Term)

Current Price:  50.80

Candlestick Patterns:  None

Measured from the FNH (failed new high) peak of 58.59 (5/30/08) to the trough of 24.39 (3/6/09), EMR has reclaimed the 76.4% price retracement at 50.52.  Measuring time from the cyclic peak of 7/18/08 (51.27 intra-week high, 50.50 close), it took EMR a Fibonacci 89-weeks to reclaim 50.50 while notching an intra-week high of 51.36.  Even if EMR were to move higher in months ahead, this is about as natural a place (per time and price) for a pause in price action to digest recent gains.

Entry:  Immediate (with daily confirmation) or with a move below 49.97

Target (Short-Term):  47.12

Target (Long-Term):  41.79

Stop-Loss:  51.48 or higher

Potential Risk:  $1.51

Potential Reward (Short-Term):  $2.85

Potential Reward (Long-Term):  $8.18

Risk: Reward Ratio:  1: 1.9  &  1: 5.4

HST: Host Hotels (Intermediate-Term to Long-Term)

Current Price:  15.12

Candlestick Patterns:  None

Yet another retail / consumer discretionary name chugging higher into prior resistance on decreasing volume and extraordinarily stretched technical measures, HST’s nearly vertical 10-week rally appears to be drawing to a close.  An Elite Oscillator™ daily sell signal that registered on the 7^th (15.33 intra-day high) remains in place and helps provide this target entry price of 14.77.  Host's rally has been so sharp and quick that it is unlikely that it has much bullish fuel left in its tank.

Entry:  Immediate (with daily confirmation) or with a move below 14.77                                      

Target (Long-Term):  12.70

Stop-Loss:  15.43 or higher

Potential Risk:  $0.66                          

Potential Reward (Long-Term):  $2.07

Risk / Reward Ratio:  1: 3.1

Long Trade Candidates

AONE: A123 Systems (Short-Term to Long-Term)

Current Price: 13.65

Candlestick Patterns:  None

This relatively 'new' stock is a great bullish setup because of the fantastic risk: reward ratio that it presents.  This is a unique chart in that the stock has been stuck in a large down-trend since it IPO'd last year, while most of the market has rocketed upwards.  For this reason, we greatly prefer taking a chance to try and catch a FNL (failed new low) rather than trying to squeeze out a few more percent on stocks that are already up 300%+ since March '09.  While the 15.90 - 16.00 target is ideal for the short-term, there is a strong possibility for AONE to rally as it did at the end of 2009.

Entry:  Immediate (with daily confirmation) or with a move above 14.15                                      

Target (Short-Term):  15.90

Target (Long-Term):  18.00

Stop-Loss:  13.22 or lower

Potential Risk:  $0.93                          

Potential Reward (Long-Term):  $1.75

Risk: Reward Ratio:  1: 1.9

SKYW: SkyWest (Short-Term - Intermediate-Term)

Current Price:  14.29

Candlestick Patterns:  Doji

SKYW is a good example of how depressed volatility can actually be beneficial for establishing a trade setup.  Last week's range was less than 3%, which enables us to keep our stop-loss very close to our point of entry in a trader that is either going to trigger immediately or become voided.  The last eight weeks have managed to hold above the 14.00 level and the trendline of support from prior swing lows is now coming into play, so any upwards push is likely to carry shares towards the previous swing high near 15.50. 

Entry:  Immediate (with daily confirmation) or with a move above 14.42                                                                                        

Target (Long-Term): 15.41

Stop-Loss:  13.97 or lower

Potential Risk:  $0.45                                                                    

Potential Reward (Long-Term):  $0.99

Risk: Reward Ratio:  1: 2.2

APWR: A-Power Energy Generation (Short-Term)

Current Price:  10.12

Candlestick Patterns:  None

APWR managed to hold a penny above the support at 9.50 and now looks like it may be poised to grab an open daily gap at 11.67, with the potential of overshooting up to 12.00.  This is basically what our ideal short-term bullish setup looks like; a wide-range, long-body candle that loses over 10%, followed by a doji-like candle with a smaller range.  A new low was made, but the week still managed to close higher, which increases the odds that a short-term swing low may be in place.  It's not a perfect setup (range isn't less than 25% than previous week), but it may still lead to a pop over the next 1-2 weeks.  We can't afford to keep a stop-loss over 10% away (low of the candle at 9.51), so if our entry price is triggered we will be using an initial stop-loss just under 10.00 and scaling it up from there.

Entry:  Immediate (with daily confirmation) or with a move above 10.59

Target (Short-Term):  11.67 - 12.00

Stop-Loss:  9.98 or lower (trade is only voided if price drops below 9.50)

Potential Risk:  $0.61

Potential Reward (Short-Term):  $1.08 - $1.41

Risk: Reward Ratio:  1: 1.8 - 2.3

Disclosure: no position in the securities mentioned at the time of publication.  During any given session, we may trade any instrument bi-directionally.