FLUOR Upgrade! W00t W00t W00t!

This morning I was pleasantly surprised to read that Fluor was upgraded by an analyst at JP Morgan after yesterday’s announcement that Fluor will be awarded part of a multibillion dollar U.S. Army Contract. Read the story here:

http://www.forbes.com/feeds/ap/2007/06/29/ap3871215.html

Catching this upgrade is like winning the swing trading lottery. It adds instant profits and allows me to lock in those profits by raising my protective stop order. The stock jumped up to $108 in pre-market trading, and is now up to $108.86 (the market opened about 10 minutes ago).

Whoa! In the last few minutes the stock has reached $110.72. It has broken through resistance and is now above my price target of $109.90! If I sold now at $110.72, that would be a profit of +$363.50, or +7% - not bad for 2 days! But I think FLR could see some more upside within the next few days, so I’m going to hang on for the ride. I’ll place a stop-limit order to lock in a profit in case FLR starts to drop.

I’ll put the stop 2% lower than FLR’s current price, at $108.45. I’ll put the limit 10 cents below, at $108.35.

FLR Watch

FLR got all the way up to $105.50 this morning, so I decided to put in a stop-limit order at my break-even price (to cover $14 in commissions). You can see my order above. If FLR drops to $103.78, my stop price, it will trigger a sell order. This sell order will have a limit price of $103.73, meaning I will not accept a sell price lower than $103.73.

The advantage of putting in this order is that I have no chance of losing money on this trade. The disadvantage is that FLR could drop to $103.78, and then skyrocket up to $110 - thus I would be stopped out of the trade and then miss out on some potential profits.

With FLR at $105.50, that would be about a $100 profit if I sold. It's tempting, but patience is key.

Fluor Corporation (FLR) - Swing Trade

Since I now work at Fluor, I've been watching Fluor stock - symbol FLR. I bought some today for a short term swing trade (1 to 10 days). Here are the specifics:

50 shares @ $103.45 = $5172.50

Price target: $109.90 (+6.2%, +$322.50)

Stop order: $101.49 (-1.9%, -$98.00)

Risk/Reward: 1/3

I have planned the trade, now I will trade the plan. I will raise my Stop-loss order as the stock rises, locking in a profit if I get that chance.

Why Did I Buy?
Take a look at this 6-month, daily chart with volume, stochastic, and MACD:


The green arrows show every time when stochastics has dipped below 50, and then crossed up above the signal line. This happened today. Each and every time this has happened in the past, the stock has climbed anywhere from 4 - 7% as stochastics bounced back above 80. If Fluor's 6 month uptrend remains intact, it should give a repeat performance. I'll watch the stock closely for signs of peaking out - like stochastics above 80, or the price hitting past resistance around $110.

These stochastics troughs also correspond with reversals in MACD divergence. You can see FLR's MACD beginning to bottom out.

Volume: Today the volume was healthy, which suggests big institutional buyers are driving the price higher.

50-day Moving Average: FLR bounced violently up from its 50-day MA, suggesting strong support at that price point, about $101.70.

How Did I Choose My Price Targets?
FLR was unable to break through $110 recently, so I anticipate some resistance around this price. That's how I got my price target of $109.90.

FLR has had moderate support around $101.75, which happens to be about where its 50-day MA is right now. I set my lower stop-loss order at $101.49 for a little room to play.

I'll be keeping a close eye on FLR, and raising my stop-loss order on the way up to lock in any profit.

Note: I think FLR could be a good candidate for a long-term investment, but this is strictly a short-term trade. If I decide I want some long-term, I'll get some separately from this trade. Never turn a trade into an investment.

MRVL Watch

It looks like my decision to sell MRVL was a little premature. Last Monday it didn't really move, and then Tuesday it jumped up to $17.65 on decent volume. It continued its bullish climb through Friday, closing on the high around $18.00. That's 6% higher than where I sold it.

Today it dropped hard, falling nearly 5% to $17.11. It is now back inside of its price channel, but it may be breaking out soon. I think the stock may see a little more downside within the next few days, but some of the technical indicators are beginning to look bullish. The 50-day MA is sloping upward under the stock, which may provide some support around $16.90.

The next few days should be interesting - MRVL might start to look attractive if Stochastics reaches oversold levels, and if it finds support at the 50-day MA.

Marvell Technology Group Ltd. (MRVL) - SELL

Back on 3/28/07, Jasper and I each bought 150 shares of MRVL. I bought mine at $17.12 and Jasper bought his slightly cheaper because he is quite sassy with limit orders. You can see our entry day on the Daily - 6 month chart below (click on chart for larger view).


I ended up selling my 150 shares on Friday 3/15/07 at $16.95 for about a 1% loss (-$39.50 after commissions). Jasper still has his - he says he's holding on to his as more of an "investment" and has his sights on a stock price around $21 (that would be a 24% gain).

Why I Sold
1) As you can see in the chart, MRVL is trading within a fairly orderly downward channel, and it is currently bumping its head on the "roof" of this channel. This will be its 5th time testing this "roof" line (At the beginning of March it spent a few days above this roof but it quickly fell back into the channel). MRVL may indeed be able to break out of this channel, but I'm gambling that it won't.

2) The 50-day moving average (dotted black line) seems to be weighing the stock down. MRVL has trouble staying on top of its 50-day, and it has now closed above it for the past 4 days. The stock could break free from its 50-day, but again, I'm betting it will continue its behavior and fall back below it.

3) I drew in the vertical blue lines to show peaks. Each peak exhibits similar characteristics: At the peak the Stochastic indicator is above 75, indicating the stock is overbought and ripe for a sell-off. Also at these peaks, the MACD divergence is topping out (green bars at the bottom), which means the stock is losing momentum. The stock currently exhibits the exact same characteristics of previous peaks, so it may see some downside shortly. I bailed out to avoid this possible decline. Who knows, the stock may shoot higher, but I'm out for now.

Lessons Learned
I entered the stock not really knowing what my intentions were, which isn't a good thing. I was leaning more toward a short term trade (I held the stock for about 12 weeks). I violated a key rule to trading: "Plan the trade and trade the plan." I should have set a price target and an exit strategy.

You'll see on the chart that I entered the trade a few days too early. I was "trying to catch a falling knife" and I got cut. I should have let the stock finish its downward drop and then buy when it showed signs of bottoming 3 and 4 days later at about $16.50 (3.6% lower than my purchase price). I pointed out this bullish bottoming pattern, and others, with the green arrows.

I should have been looking for an opportunity to sell, as the stock was peaking. The second red arrow shows where a decision to sell should have been obvious. I also should have been looking out for the last two times that the stock bounced off the "floor" of its trading channel. These would have been excellent opportunities for secondary buying.

What Might Have Been
Here's the money I could have made if I hadn't traded like a total n00b.

1 to 5 : 4/4/07 to 5/7/07 : $16.65 to $17.80 : +7% (+$172 Profit w/150 shares)

2 to 5 : 5/1/07 to 5/7/07 : $16.16 to $17.80 : +10% (+$246 Profit w/150 shares)

3 to Exit Day : 5/31/07 to 6/15/07 : $15.75 to $16.95 : +7.6% (+$180 Profit w/150 shares)

All of these would have been great trades, with relatively obvious buy and sell signals. The lesson here is to monitor a stock's action daily, search for emerging channels and trends, then wait for the stock to tell you it's about to turn around. That's when you take a gamble and buy. Then you have to predict where you think the stock will go, and watch the stock carefully to see when it shows signs of weakness and overextension.

This trade wasn't a total disaster however. I could have sold at the bottom:

Entry Day to 3 : 3/28/07 to 5/31/07 : $17.12 to $15.75 : -8% (-$205 Loss w/150 shares)

Probably an even more profitable way of trading MRVL during this downtrend would be to short it (look at the nasty decline from 5 to 3, a straight 15% drop). This would also require careful monitoring and nerves of steel.

About PHILTHY STOCKS

This is a page I'll use to keep up with the stock market. I'll post some technical and fundamental analysis and track the accuracy of my predictions. This will be a good way for you to see what I'm buying, selling, holding, or thinking about buying - and also a good way for you to comment and tell me whether you like or dislike my thinking. Jim Cramer always says you shouldn't own a stock unless you can explain to someone else why you own it, so this will be a good means for doing that.