Since the elementary school massacre in Newtown, CT gun makers (RGR and SWHC) and sellers (CAB and DKS) have been getting smoked. Actually, starting a little before the shootings the stocks were under pressure and then those horrible events accelerated the selling pressure. But when stocks get hit for 30% in a very short period of time there is often a relief rally...and the action yesterday in the names mentioned above are doing just that.
As you know I believe the best way to play a stock is in the
direction of its trend - and these trends are to the downside. So if you want
to play for a countertrend bounce which may reap some nice percentage gains, I
would suggest you be careful and be out on sharp moves. But if you are looking
for a bigger swing trade move and not just a scalp, then look for areas of
overhead resistance (like $9-9.50 SWHC, $45, then $46-47 RGR) to play from the
short side. (CAB and DKS may also fit this scenario but I believe pure gun
makers will be hurt much more than sellers because CAB and DKS have so many
other products in their revenue mix).
Ultimately SWHC may go to $6 and RGR may see $35 or as low
as $30. Stops above according to your risk tolerance.
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