Analysis
Starbucks (SBUX) Ready to Roll Over?
By Jack Rothstein
Jan 11, 2007, 10:45

There are a number of stocks that will be examined this morning. First a word about the market is appropriate. All three popular averages have support at the respected 50-day line. The 50-day line is important. The last steep correction occurred last year when the market averages all dipped and closed below that important inflection point and caved. The rally is extended. It is not overly extended from an intermediate-term view. The gains have been in consolidation and therefore the rapidly rising 50-day line is beginning to flatten creating an under tow. Yesterday’s action was constructive. The rally ends if the lines of support in all three popular averages are violated on a closing basis. It could happen before the end of the week. What may otherwise happen is a move to test the recent highs. NASDAQ is currently leading. The current move is led by technology. Stocks like AAPL and CSCO. I own CSCO, but not AAPL. The trend is always your friend. Futures are down this morning. Overseas markets are mixed. Optimism runs high but not extreme. The current rally is extending this long of tooth bull market and as long as the tape remains constructive the bulls get the benefit of the doubt.

Sun Microsystems (SUNW) 6

I am long SUNW. The wave is bullish. SUNW broke out yesterday to close above 6 for the first time in almost five years. It is confirmation that SUNW is in a robust advance that is picking up a good head of steam. It is extended. It is leading. It is an extended stock that ought to be bought coming into the 5.50 zone. A market correction and it finds that zone. Break outs typically are tested. Yesterday’s action was accompanied with big volume. Big enough to get lots of attention.

Block Buster Entertainment (BBI) 6.28

BBI is a good stock to own long right now. It broke out in yesterday’s session with a move above 6 in heavy trade. The current chart causes one to lick the chops and take a juicy bite. BBI is a leading stock. After years of decline and neglect, it is acting quite the darling. It trades up on all cylinders. It is better had coming in. It has strong support in the 5.50 zone. A test in that price zone provides a buying chance. It is just getting started.

Level 3 Communications (LVLT) 6.03

I trimmed the other day in strength. I maintain the majority of the stake. It appears to be gapping up at the open. Futures have firmed. It flashed the buy signal the other day when it went topside 6.10. The fact that it tested and held indicates an authentic break out. Lets see where it ends on Friday prior to the long weekend. Right now it fires on all cylinders.

Thermo Fisher Scientific (TMO) 47.19

All the stocks mentioned thus far have one common thread and that is they are all in advances and all have broke to new highs. It is bullish when a stock makes a new high. TMO extended its advance going topside making a new high yesterday as did the others mentioned. It is in the midst of a robust long-term advance bolstered by the stunning short term action. It is a volatile instrument and will come in enabling nimble traders to grab it as it comes into support now in the 46-46.50 zones.

Starbucks (SBUX) 34.75

SBUX is a good short. It is a good stock to sell short especially if it fails to hold the 34.60 zone. A close below 34.60 is a sell signal.  It may happen today. It rolled over recently and snapped back. It is rolling over again.  The last time it rolled over it gave up 10 points. It has the potential to test that bottom 15% from current levels. A drop below 34.60 lifts the odds that that will occur.

C.H Robinson (CHRW) 43.20

Have been short and using this instrument to profit selling it short because it is in decline. Transports have been under pressure since peaking last May. While the Dow recovered and moved to higher levels of trade the transports have noticeably lagged creating a negative divergence accounting for the heaviness of the current tape. Either the transports get in gear or the tape will fade. I am short CHRW because it trades in a declining pattern. It trades below all key inflection points. It peaked at 55 in July and since then it has drifted south. A drop below 42 on a close is a signal to come at it more aggressively. A rise into the 200-day line is another signal to sell short with a tight stop. It has been able to maintain itself above its 50 day line. A drop below that line and it could cave. The average price over the last 10 trading sessions is 42.

Jack Rothstein is an SEC-registered investment advisor who has been analyzing, buying and selling stocks for more than 19 years. For a free 30-day trial subscription to the Wealthcast Stock Market Letter & Snapshot Service, click here.

It should not be assumed that the methods, techniques, or indicators presented on these websites will be profitable or that they will not result in losses. Past results are not necessarily indicative of future results. Examples presented on these websites are for educational purposes only. These set-ups are not solicitations of any order to buy or sell. The authors, Tiger Shark Publishing LLC, and all affiliates assume no responsibility for your trading results. There is a high degree of risk in trading.