Tuesday, September 05, 2006

Short Trade and Chart: Boom Looks Ready to Bust

A "topping pattern" seems to be forming in BOOM, peaking at 42.50 in May, followed by a couple of weak attempts at remounting by bulls. Notice that the Stochastic is extremely overbought at 90, and the stock has failed in the recent past when that number has hit. The move does have a nerve tingling quality to it since it has been strong on the recent up move, but the fact that the fast stochastic has crossed down below the slower one lends some comfort. This trade is not for the faint of heart, and a tight stop is a must.

I went short 500 shares of BOOM at an average price of $36.90. My stop will be placed just above the $37.50 resistance zone and my target is $35 for the first 250 shares and $32.50 for the remaing 250 shares.

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