The market is continuing its downward movement this morning after the Fed said that a recovery in the economy was making a slow down. Futures have dropped below 100 points. I am going to avoid a Buy today and just work on a Short Sale. Later in the day, we will look at an Overnight Trade as well. The virtual portfolio only has settled money for one buy anyways today. Yesterday, we got involved in three plays. Our first play was a Buy in LDK Solar. This trade worked well for a 2% gain on the day for us. We got involved at 7.28 and exited at 7.42. The stock moved into the 7.70s this morning if you were still holding. Our Short Sale of the Day ended pretty neutral for us in Fossil Inc. (FOSL). We got involved at 45.50. We are still holding onto this one, but I will not hold past today.
Finally, we also had an Overnight Trade of the Day in SunPower Corp. (SPWRA). We got involved at 12.90, and the stock is set to open for a 4% gain this morning at 13.40. We are selling at the open as I am fearful this market is going to take all gains down.
Let’s get into a Short Sale I see today…
Short Sale of the Day: CareFusion Corporation (CFN)
Analysis: CareFusion is a medical technology, equipment, and supply research and manufacturing company. They specialize in respiratory and infusion products as well as medical dispensing mechanisms. The company reported earnings this morning at a 19% growth in revenue and a penny beat at 0.38 vs. 0.37 expected for earnings per share. Yet, despite the rise in revenue and earnings beat, the company dropped in profits and also commented that they will 
need to eliminate 5% of its workforce. The company forecasted some nice gains, and this along with the growth in revenue has helped move the stock up more than 3% in premarket.
On a morning like this, 3% is a lot. So, we have to ask ourselves is CFN truly going to maintain those gains in a selling day or will it go higher or lower. For one, the company’s earnings did not impress me. I was shocked to see those gains with a 5% cut and reduction in profitability. Further, the gains have put the stock very near its upper bollinger bands and will cause the company to become overvalued on RSI.
I expect we will see a pop out of CFN this morning, but the market is set to open low and most likely will hold that or move lower. Therefore, I think we are safe to expect CFN to give back some of its gains and move lower with the market. The stock has dropped almost 20% in the past two months, and it has little days of much gain. Therefore, I think some profit taking is definitely in store.
Let’s see how the market opens and whether this one pops or not. If it does not then we can enter cautiously at a lower price.
Good luck!
Entry: We are looking to get involved at 22.30 – 22.50.
Exit: We are looking to cover for a 2-3% gain.
Stop Buy: 3% on top.
Good Investing,
David Ristau
