Oxen Group’s pick: Shorting CNX
Courtesy of David at the Oxen Group
If I were a betting man, I would bet the market is still going to trend down Wednesday and it won’t have the sort of rebound it has had over the past three session. Yet, even with futures posting their lowest numbers in weeks going into today’s trading, the market still will be heavily influenced by important reports on crude oil inventories, durable good orders, earnings from Sprint, Time Warner, and ConocoPhillips. However, none of these indicators, has the power, unless extremely positive, to really change the market.
I think Wednesday is that big day we are all looking for where we drop 1-2%. Tuesday, unlike Monday and Friday, saw an attempted recovery that failed. This means less and less money that is on the sidelines is ready to jump into the market as fears rise. One stock, however, that is an interesting play is CONSOL Energy Inc. In after hours coal producing rival Massey Energy reported outstanding earnings that drove the stock up 5%.
CONSOL reports earnings on Thursday. Tomorrow, it is a big day for investors going into earnings. The way I would play it at the current market direction is that it will most likely gap up on the news from Massey, and it should be shorted into a lower opening market. However, as it hits a bottom for the day, we may want to pick it back up as it could rise into earnings. This definitely changes if the market is green or moving to green after the morning news. If the news is bullish, the stock will probably gap up, move down, back up, and trail off as the market can’t hold the upward movement. Either way I like CONSOL as a solid short moving into a buy in late afternoon.
Entry: Recommend 5-15 minutes in if data and earnings are weak, waiting 35-50 if the opposite.
Exit: We recommend exiting after a 2-4% increase.
Stop Loss: We recommend a 3% stop loss on all buy in prices
Upper Resistance: (lower) 32.00
