Mother Russia is going to be proud of me. Tonight's daily setup, HWP, another one of America's darlings, has set up as a short.
Fundamentally the stock has gotten some bad news from outside itself. The stock sold off on heavy volume on Friday when Agilent warned of a shortfall in earnings for the quarter, and adding to the pressure was the report yesterday showing that PC sales are slowing down.
Technically this chart is just sickening. Ever since the stock peaked on 6/5 it has logged 7 distribution days. 4 of those distribution days came on volume spikes. The last attempt at its high came on waning volume, signaling that the stock maybe tired, and forming the second top in the double top formation. The stock is a short under 115 1/2, which was broken today on heavy volume. The stock also closed below its 50 day moving average, and is pretty close to making a lower low on its relative strength line (it actually made a lower low on the weekly chart below) further enhancing the bearish scenario. An island top will be created, if, over the next several days the stock were to gap down in this area on heavy volume to go along with its gap up on heavy volume on 6/5.
Looking at a longer term chart (see below), there are two major support lines. The stock has been trending higher since the stock bottomed at the end of October last year. During the last sell off, the stock found support, and bounced higher off of this trend line, which corresponded with the stocks breakout out of a cup and handle pattern earlier this year (man those long term charts can be helpful).
Conservative short players may want to cover off the trend line support currently at around 106, unless the stock slices through there on heavy volume. The next stop if that happens is 92 1/2, the area of the cup and handle breakout, and currently around the 200 day moving average. If you do cover at 106, and the stock bounces higher watch the volume. If the bounce comes on low volume then keep your eye on the stock as a possible re-entry short if it breaks the trend line. Also keep in mind that the 200 day moving average is trending higher, and could act as support before the stock reaches 92 1/2.
One more thing. The stock is due to report earnings in early August, so this breakdown in the stock could be a preview of a possibly poor report. But, if the stock starts to show accumulation over the next few days, don't over stay your welcome on the short side.
Just to let you know, I shorted the stock today at 115 1/2.