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TheStreet Open House

Dragons and Monsters: Swing Trade Ideas for Wednesday, May 21

Stocks in this article: DWA LGF

NEW YORK (TheStreet) -- Good morning traders!

Today's top long picks are Dreamworks Animation (DWA - Get Report) and Lions Gate Entertainment (LGF - Get Report).

1. First, let's look at the computer animation company, Dreamworks, known for movies like How to Train Your Dragon and the Shrek movies.

Dreamworks traded positive on Tuesday, closing up 2.99% to $26.55 per share.

  • Tuesday's range: $25.60 - $26.57
  • 52-week range: $20.78 - $36.01
  • Tuesday's volume: 1,080,046
  • 3-month average volume: 1,236,540

Dreamworks is a rounded bottom breakout. Yesterday shares closed over the 50-day simple moving average, triggering my interest. Today we need to see confirmation by seeing more buying strength, and another close above the 50.

I would look to buy this on positive trading, but since the overall market is faltering, I would give it some time this morning. There is positive sentiment in this chart, with waxing volumes for the last few days on positive trading. If you look at the last three trading days on a candlestick chart, the candles formed have no real top wick, which shows there isn't selling pressure at this level.

There is overhead resistance at the gap down on April 24. The gap down resistance levels are $26.86 to $27.79, and gaps always get filled eventually.

Above the gap, there is resistance at $28.85, then again at the 200-day simple moving average at $29.98. I'd target the 200-day simple moving average for a 13% return from yesterday's close. I'd set a stop below yesterday's low at $25.60.

This trade need confirmation today, and I'll lose interest if it trades back below the 50, but real confirmation will be at the close. Stay long until you see a sell signal, or a close below the t-line.

Remember, it's not bad to get stopped out and get back in if the trade is working.

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