Dan Fitzpatrick
In such a strong market, it can be tough to find viable short candidates. Why? Well, because everything is moving higher, and everybody is a buyer. In a strong market, it just pays to go with the flow.
But on the other hand, when a stock remains weak in a strong market, it's weak for a reason. A rising tide lifts all boats, right? But if a boat is not being kept afloat by the water, it's probably one you want to avoid. That's what I'm seeing in Goldcorp (GG Quote - Cramer on GG - Stock Picks) now. The weekly chart below shows a stock that has been cut in half since mid-2006. The stock peaked in a rush of enthusiasm and promptly sold off to establish support. Let's take a look at the chart. A year ago, the bulls pushed the stock up above $40 on heavy volume. But a couple of weeks later, the sails became tattered, and Goldcorp wound up dropping to $20 a share. After that selloff, the bulls pushed the stock back up to around $30, which marked a 50% advance in price and a 50% retracement of the decline. Pretty symmetrical, huh? A Fibonacci retracement comes to mind, but that's a bit outside the scope of this trade idea. But since the stock's retracement to $30, Goldcorp has been gradually moving lower and the advantage is with the bears. I like the risk/reward profile on this stock because the short interest is quite low, with less than two days to cover. (Days to cover equals the number of shares sold short divided by average daily trading volume.)| Goldcorp (GG) -- Weekly |
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