Tuesday’s Stock Charting: Breakouts And Breakdowns

There aren’t any notable breakouts on volume greater than 500K today. You can’t expect too many of these on a -280 point day.

Lehman Brothers (LEH) was the star of today’s financial media. I won’t comment on rumors since there are conflicting reports from numerous sources. To add fuel to the fire, S&P stated that they may cut LEH’s “A” long-term credit rating. LEH closed at $7.79, down 45%. The only possible support level remaining for LEH is at 1999 levels.

Pep Boys (PBY) reported Q2 earnings yesterday after-hours of $0.10 per share ($0.11 from continuing ops incl. $2.2 million tax benefit) or $5.4 million vs. $0.08 per share or $4.2 million a year ago. Revenue declined 10% to $500 million from $552.1 million a year ago. Analysts were expecting $0.7 per share on $515.3 million in revenue. Same-stores dropped 7.5%. It’s no surprise that more and more people are delaying maintenance and simply have little need for non-essential auto products. PBY negated 2-months of gains in a single day (down 25% today). I expect continued selling of smaller magnitude, and afterward, a small bounce up to the $7.50 level.

C&D Technologies (CHP) reported Q2 earnings yesterday after-hours of $0.05 per share or $1.2 million vs. a loss of $0.12 per share or -$3.1 million. Analysts were expecting earnings of $0.12 per share, widely missing expectations. CHP cut through $7.25 and $6 support today as well as the 200-day MA. Expect some churning in the $6.50 area as the downtrend continues.

Terra Industries (TRA) is a fellow agricultural chemicals/fertilizer stocks in the same group as POT (POT) and AGU (AGU). There’s this headline that says “As Fertilizer Prices Stay High, Potash is the Pro’s favorite”. Wrong, they’ll soon find out that a confirmed downtrend cannot end without systematic capitulation. TRA is a stock only fit for swing trading due to its range-bound characteristics. TRA broke through several support levels and is approaching major support at $34. Traders should expect a nice sized bounce for the short-term.

Time Warner Telecom (TWTC) got crushed today after both Citigroup and Merriman Curhan Ford downgraded the stock to “Hold” from “Buy”. We all know that any downgrade from “Buy” is a “Sell” and investors weren’t fooled. TWTC gapped down, but formed a hollow red candle, signaling that buyers have bought at the lows, but sold off TWTC’s high. Expect a dead cat bounce on this one.

Canadian Solar (CSIQ) dropped along with the entire industry due to a potential decline in selling prices and solar panel oversupply. The entire energy industry is in a downtrend, and solar is no exception. CSIQ will approach the teens very quickly. The downtrend is in a mature phase and capitulation is likely to come within 2-3 weeks.

The same goes for the coal sector. It is still early in the downtrend for James River Coal (JRCC) and the other coal stocks. It is highly likely that JRCC will approach the teens within one month. I will consider shorting JRCC at $25-$30 if there’s a pullback to the 200-day MA resistance.

Posted in Categories: Canada, Contributor, External Research, Financial, Stocks.

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