Bruker Bears Have the High Ground
Shares of Bruker BioSciences (BRKR) fell off a cliff in early May, and the bears still have the upper hand. A look at the X-ray maker's technical picture shows a possible short-trade setting up.
The stock displayed strong price appreciation from February to April of this year. However, after Bruker met first-quarter targets, shares succumbed to a Bear Stearns' analyst report that the stock was overvalued.
Since that time, it appears that buyers have become more cautious. A capitulation phase like Bruker experienced in early May usually leads to a strong reversal that pushes the price back up to the point where shares were trading before the selling exhaustion.
In this case, this level equates to about $11.50. Instead, short-covering and reversal traders could only push the price back up to $9.40 before Bruker shares began forming a double bottom. The retest of the $8 support in late May shows that buyers are still willing to purchase weakness, but not strength.It will take some time for the stock to build a base between $8 and $9.50, if the bulls in this life sciences company are to regain control of the daily chart. Right now the stock's near-term support level at $8 is in danger of failing, which could lead to a further decline to the former $7 support. In order for the bulls to regain control of the daily chart, they will need to push the price back above $9.40 on a closing basis. A close above $9.40 would likely cause the bears to cover their positions, and invalidate the developing short setup. But given the lower-volume reversal that occurred in May when the stock bounced off $8 and moved back up to $9, Bruker appears to have a higher probability of at least testing $8 again before climbing above $9.40 on a closing basis. And if the bears prevail, shares could break even lower.
| Bruker BioSciences (BRKR) -- Daily
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV