Trading is not a game of exacts. Perfectionists need not apply. Markets are made up of many irration...
A Trio of Opportunities
09/22/2006 12:00 am EST
Using his comprehensive technical trading analysis models, expert trader Jon Markman finds three stocks in three diverse industries, just brimming with short-term trading potential. Here, he gives investors precise trading instruction to maximize their profits.
"Dril-Quip (DRQ NYSE) is an oil-service company that is a small player in the deepwater drilling and production equipment business. DRQ has been a major beneficiary of the rise in oil prices and drill day-rates (rate at which it charges companies to use its products). DRQ trades at a large price/sales ratio premium-about 40%-to its peers and industry, mainly due to strong EPS growth. The company and its competitors have been turning down in recent trading due to the fall in oil prices. Dril-Quip is one of the most volatile stocks in the industry and has had major moves happen in short order in the past. It's an interesting case study right now and looks like a great buy. It's bouncing off its rising 200-day moving average, and is oversold in terms of its relative strength index (RSI) and 20-day stochastic oscillator, a metric that helps us understand when a stock is overbought or oversold. It has broken its three-year uptrend on big volume, and looks to be headed back to the mid-$50s. Short it if it closes below $65, aiming for $55. Buy if it moves above $75, aiming for a target of $85.
"Centurytel (CTL NYSE) is a Louisiana-based telecommunications company offering long distance, broadband Internet, and fiber transport services. The company is a member of the S&P 500 and is one of the largest non-Bell telecom companies still around. Centurytel has been trying to break out of a six-year long base that started after the technology bubble. The telecom stocks have been a great buy all year. This stock would be considered a slow mover, so I recommend buying the CTL Oct. $35 Calls at around $5.30, which represents very little premium. The use of options versus the common stock will enhance our return. Target for the calls is $7.50. Stop the puts if the common stock closes below $39.
"Grupo Aeroportuario (PAC NYSE) operates and manages 12 Mexican airports located near hot tourist destinations like Puerto Vallarta. The company went public earlier in the year and has been stable, but recently the stock has broken resistance and its uptrend is getting stronger. This will be another play on airlines gaining strength, and you will have exposure to a new company that can have added momentum. Buy PAC at current prices. Target is a new high over $40. Set a stop on a close under $32.25."
The key risk-on and off drivers today are the same – U.S. politics, global growth, other centr...