RealMoney Silver - Robbins & Myers Could Stall

Robbins & Myers Could Stall
By Chris Schumacher
RealMoney.com Contributor
10/1/2007 12:57 PM EDT

Robbins & Myers (RBN) has seen price behavior that has been extremely volatile since April 2007. The nearly 75% increase in price from the $35 level to over $62 in July created a strong retracement back to $43 in August when the rest of the markets took a nose dive. Not even this diversified machinery company was immune to the weakness in the broader markets during that period.

Since the failure in August off of the $62 level, the price has seen one more buy-side gap and a retest of the $60 area. For now, there is slight weakness in price behavior off of $60. If this stock's history of price action around gaps serves as a guide, the stock should move back to $49.50 to fill the gap in the near term.

The broader markets are coming off of the window-dressing period, and we have employment data on Friday. You'll remember that the last two employment reports have created a drop of 280 points and 250 points, respectively. If investors have a similar reaction coming from Friday, this stock could participate with the market angst and create the gap fill back to $49.50.

The ideal setup for this stock would be to see an entry at $59 with a stop at $62.50. This offers $3.50 in risk. The first profit target would be placed at the high end of the gap range at $54.50. This would offer just over a one-to-one reward/risk ratio. Partial profits could be taken there. The final profit target would be placed near the gap at $49.50, with full profits taken there.

Should the price fall under $56 without first offering an entry this week, this trade setup is no longer valid.

Updates of previous picks: Stanley Furniture (STLY) moved under $16 last week without first offering an entry. This is being taken off the watch list.

At the time of publication, Schumacher had no positions in the stocks mentioned, although holdings can change at any time.

Chris Schumacher is a financial trader, speaker, writer and co-author of Techniques of Tape Reading. While Schumacher cannot offer specific investment or trading advice, he appreciates your feedback; click here to send him an email.

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