Editor's note: Formerly, Dan Fitzpatrick's short trading ideas were available only to subscribers to TheStreet.com's Short Advisor. Now these picks are being offered to RealMoney and TheStreet.com readers.
Endurance Specialty Holdings ( ENH) is an insurance company whose shares have been on the run since setting an August low of around $29. But over the past few weeks, the stock has come under pressure and is now trading just below a critical level. Let's take a look at the chart (below). Notice how the stock has just fallen below the 50-day moving average. It is also down below the long price-by-volume bar at the $36.50 to $37 level. The longer the price-by-volume bar, the more trading that has occurred at that level. And heavy trading equates with heavy financial commitment. So as the stock falls below support, all that financial commitment becomes negative -- bulls are losing money, while bears are happy. For a short trade in Endurance Specialty, the entry would be at $36.15, just below yesterday's low of $36.21. Once the trade is open, try putting a buy-stop just above the 20-day simple moving average, at around $37.50. The price target on this trade is $33, a bit more than 10%. That's an acceptable 1:3 risk-reward ratio.
| Endurance Specialty (ENH) -- Daily |
Recapping Previous PicksA number of previous short ideas that I've suggested for readers of the Short Advisor remain open. Here's where those trades stand:
- Circuit City (CC): The current stop for Circuit City is $21.50. To lower the trading risk, drop that down to $20.50. The price target continues to be $15.
- Federated Department Stores (FD): The current adjusted buy-stop is down at $40.30 -- a worst-case, break-even trade. But let's lower that to $39.25. The target is around $33.
- Kohl's (KSS): The entry point was hit at $67.90 last week. The trade really seems to be working now, so keep the stop at $71.20, which is just above the 50-day moving average. The price target is down at $60.
- LAM Research (LRCX): The current buy stop is at $54.20. Let's drop that closer to the 50-day moving average and place it at $52.05. The target remains $40.
- Motorola (MOT): The current adjusted buy-stop is at $21.50. That stop remains the same, and the adjusted target continues to be $19.