Editor's note: Formerly, Chris Schumacher's short trading ideas were available only to subscribers to TheStreet.com's Short Advisor. Now these picks are being offered to RealMoney.com and TheStreet.com readers.
, which offers services to oil and gas companies, missed out on much of the gusher in the oil patch last year.
The company's technical and support services are used in various aspects of the drilling and production process, and given the demand for energy and energy-related shares in 2006, this stock should have fared better.
But after the March 2006 spike that took shares from $14 to above $22, the stock sank to a low under $12 in October. Since then, a potentially bearish double-top formation has been forming. The pattern is developing between the 200-period moving average, a hidden support level, at $15.30 and resistance just above $18.
I would expect that the support level at the 200-period moving average to hold and create a reversal. And in fact, this did occur in January 2007 as price moved from $15.30 to $18.
However, the resulting failure of the shares off of $18 resistance led to a retest of the 200-period moving average support and shows that distribution pressure is outweighing accumulation pressure.
A close under the 200-period moving average level should confirm that a downtrend continuation signal is a higher probability than a move higher.
The ideal entry strategy for this setup would be to first see the share price move back up above $16, say to $16.30.
The stop-loss should be set at $18, where the stock has been topping out. This strategy would offer $1.70 in risk, and the first profit target would be $14.60 to satisfy the 1-to-1 reward/risk ratio. Partial profits could be taken there.
RPC (RES) -- Daily
The final target would be placed at $12, where the rest of the remaining position could be closed for full profits.
If the price of the stock should close under $15.25 without first offering an entry, this trade setup is no longer valid. Shares of RPC closed at $15.51 Friday.
Updates on Previous Picks
Alliance Resource Partners
did not set up
The ideal entry strategy for short exposure would be to see an entry at $35.75 with a stop at $37.75. This offers $2 in risk. The first profit target would be placed at $33.75 and a final profit target will be determined if the current support at $33.50 fails to hold as support on a closing basis.
If the stock price should move under $33.50 without first offering an entry, this trade setup is no longer valid. Shares closed at $35.16 Friday.
with an entry at $24.36. The stop is at $26.25, which offers about $2 in risk. The first profit target would be $22.25, where half of the position could be closed to serve the 1-to-1 reward/risk ratio. The final profit target would be based on the February 2004 low at $19.50. Shares closed at $24.74 Friday.
with an entry at $12.80. The stop at $14.25 offers $1.45 in risk. The first profit target is at $11.35 to satisfy the 1-to-1 reward/risk ratio. Partial or full profits could be taken there. If partial profits are taken, the stop can be lowered to $13, and the final profit target would be the September lows of $9.50. Shares closed at $12.97 Friday.
did not set up
last week. The ideal entry is at $50, and the stop would be placed at $52.25. The first profit target, where partial profits can be taken, is at $47.75 to satisfy the 1-to-1 reward/risk ratio. The second profit will depend on how well the 200-period moving average level holds as support. If the stock price can close below $46.50, the probability of a downtrend continuation signal becomes stronger, and the ideal exit strategy will be between $43 and $43.50 a share on the rest of the position.
If the stock price closes under $46 first without offering an entry, this trade setup is no longer valid. Shares closed at $47.38 Friday.
At the time of publication, Schumacher held no positions in the stocks mentioned, although holdings can change at any time.
Chris Schumacher is a financial trader, speaker, writer, co-author of
Techniques of Tape Reading
and and contributor to
. He has delivered seminars throughout the U.S. and is a featured speaker at trading expos. He is a graduate of Ohio State University and has served as a guest lecturer at Ohio State University's Fisher College of Business as well as the Center for Entrepreneurship. While Schumacher cannot offer specific investment or trading advice, he appreciates your feedback;
to send him an email.