It was a nice way to end 2008 for a few bulls. In an otherwise dismal showing, the worst since 1931, the broader averages scored gains of 4.74% in spots like the S&P500 ETF (SPY) and well above historic tendencies of 1.2%. What’s more there are still two sessions remaining before Wall & Main say good bye and hopefully “good buy” to the seasonal tendency.
Looking forward, this market observer and option strategist remains “Obamaistic” of better investing conditions for bulls and eventually, a stronger and re-tooled economy. As such and with internal biases affecting my vision, scanning my database of stocks and admittedly I’m feeling that anxious urge to “Buy, Buy, Buy!” that might even rival the Mad Money’s sometimes over-the-top enthusiasm.
With the inauguration less than three weeks away, it is anticipated the market’s trend will remain up and a retest of the November highs in the market, a distinct possibility. It’s not too hard to imagine investors putting fresh, albeit less monies, to work while embracing the dawn of a new and hopefully stronger and more prosperous era for all.
Should the market deliver a strong start for investors predicated on forward-looking optimism and discounting the still ugly economic reality facing 2009, remember this—there’s always a trading range somewhere and not just bull and bear markets. On that note, let’s take a look at a couple charts poised for upside. Remember though, a fool and his money are soon departed, so always keep the option to “schnitzel a little”, if optimism does indeed prevail, a part of your trading reality.
Figure 1: Rambus (RMBS) Daily Cup-with-Handle
There’s honestly nothing fundamentally redeeming about Rambus (RMBS) when digging into benchmark ratios and stats used to measure a company’s health and its prospects versus the competition. In saying that though and in the case of Rambus, much of what we currently see may not be the whole truth.
The company’s current results have a rather large albatross of ongoing litigation against rival chip makers weighing in. However, back in late November a pre-trial patent ruling found Rambus receiving a favorable verdict against its competitors. The news was quickly reflected in the stock as shares jumped nearly 31% following the report. However, the buying didn’t stop there and over the past month, shares of RMBS continued to climb before its most recent action of consolidating those somewhat heady gains.
Ultimately, more favorable news on that front should lead to better days ahead for a stock known to keep the momentum crowd busy for stretches at a time. When that news hits the market place (with no guarantees that it will of course) isn’t known. However, for proponents of relative strength, within the semiconductor (SMH) space traders would be hard-pressed to find a stronger stock.
Technically, the latest price action also has RMBS putting together a bullish four-month long cup-with-handle pattern. Currently, the handle is nestled against the 200-day moving average, as well as having PS Elliott suggesting a W4 top. Both those technicals are still obvious and real resistance at this time. However, the interpretation is the bulls have a decent technical catalyst for further upside momentum if those barriers are cleared. And judging by a dwindling short interest over the same period, it seems more than a few other recent bears agree.
Figure 2: MGM Mirage (MGM) Daily Baser
If traders are really willing to roll the dice on being “Obamaistic” in 2009, there are few venues likely better suited than MGM Mirage (MGM). The casino operator is straddled with debt. Consumers busy spending at Wal-Mart (WMT) aren’t taking those savings so they can blow it in Vegas on a frivolous vacation. And all those trade shows and conventions that bring in so much mad money to the likes of MGM Mirage, well I’m sure there’s a bit less of that likely to happen as well.
The shorts seem to agree on all of the above. As of the most recent data located, there were still a heavy 8.1 days of short interest in MGM. For the bulls though, things do appear to be shaping up away from the craps tables and on the daily chart tea leaves.
Checking the daily chart and MGM has begun to build a nice looking base. Since the Thanksgiving holiday, the stock has moved higher in short bursts of upside price action followed by two periods of lateral consolidation. The latest period of inertia is two weeks in length and has found support from the 50-day moving average. A technical breakout, should it occur, isn’t likely to help investors caught living the dream during the halcyon days of 2007. In saying that though, some available quarters for 2009’s bulls located just off the ground floor—do look tempting for an overnight stay or temporary residence.
Chris Tyler
Senior Staff Writer & Options Strategist
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The information offered here is based upon Christopher Tyler’s observations and strictly intended for educational purposes only, the use of which is the responsibility of the individual.
