Robbins & Myers Could Stall

Robbins & Myers (RBN - commentary - Cramer's Take) 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Should the price fall under $56 without first offering an entry this week, this trade setup is no longer valid.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 - commentary - Cramer's Take) moved under $16 last week without first offering an entry. This is being taken off the watch list.

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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.