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.


The power has been flowing to the bears in Microsemi ( MSCC) for some time.

The company makes integrated circuits and semiconductors, which are used to manage power consumption in electronic devices, such as laptops, flat-panel TVs, implantable pacemakers and satellites. While its industry group has actually been rather strong over the past six months or so, shares of Microsemi have been declining at a fairly steady clip.

Let's look at what the weekly chart (below) is telling us.

First, after rolling over in early 2006, the stock has been trending lower ever since.

Second, the relative strength index (RSI) -- a measure of momentum -- has been hitting a series of lower highs and lower lows, confirming the downtrend. (RSI ranges from 1 to 100; a reading above 70 is generally bullish, and below 30 is bearish.)

Last, notice also how the last rally failed to tag the middle Bollinger Band. The stock has now fallen below $18, with shares closing at $17.98 Wednesday.

Given these indicators, the outlook for Microsemi still looks glum, offering traders a short opportunity.

The short entry would be at $17.50, just below last week's low.

Once the trade is entered, the buy-stop should go around $19.25. If Microsemi rebounds that high, you don't want to be long.

I'm looking for the stock to drop down to test $14, so that's the downside target.


Microsemi (MSCC) -- Weekly


Updates on Previous Picks

Several short ideas that I've highlighted recently remain active, while one has closed over the past week.

  • Amazon (AMZN), last week's short idea, is still on the watch list, with a suggested entry price of $37.05. Shares closed Wednesday at $37.88. Once the short trade is entered, the stop should be set at about $39.60. The price target is down around $32.
  • Endurance Specialty Holdings (ENH): The current buy-stop for this short idea is at $37.50. Lower that to $36.15, which was the entry level, to eliminate the potential of a losing trade on this short. Shares closed at $35.07 Wednesday, and the price target remains $33.
  • Kohl's (KSS): The entry level of $67.90 was hit about three weeks ago, and the current stop is $71.20. Shares closed Wednesday at $67.98, so lower the stop to $70.25. The price target is down at $60.

Closed Position

  • Federated Department Stores (FD) hit the adjusted stop of $39.25 last week, closing out the trade for a very small profit.

At the time of publication, Fitzpatrick held no positions in the stocks mentioned, although holdings can change at any time.

Dan Fitzpatrick is the publisher of StockMarketMentor.com, an advisory newsletter and educational forum dedicated to teaching effective risk management and trading methodologies to aspiring traders and investors. He is a former hedge fund manager and a member of the Market Technicians Association, and he now trades from his home in San Diego, Calif. While Fitzpatrick holds various securities licenses, he does not give recommendations to buy or sell stocks. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. He appreciates your feedback; click here to send him an email.

More from Investing

Markets Look Confused After Latest Beating

Markets Look Confused After Latest Beating

Jim Cramer's Investing Rule #2: It's OK to Pay Taxes

Jim Cramer's Investing Rule #2: It's OK to Pay Taxes

General Electric Expulsion From Dow Symbolizes Unsettled Week in Markets

General Electric Expulsion From Dow Symbolizes Unsettled Week in Markets

3 Best Investing Opportunities Right Now in Closed-End Funds

3 Best Investing Opportunities Right Now in Closed-End Funds

How Small-Cap Stocks Can Protect Your Portfolio From a Trade War

How Small-Cap Stocks Can Protect Your Portfolio From a Trade War