Tuesday, January 12, 2010

Reader request - FUQI

This one is for Lee. Since he was the first one (though hopefully not the last one!!) to compliment me on my new blog, here is a thorough analysis of FUQI.

Here is the good news Lee. The chart looks extremely messy due to amazing amount of support around the 20 area:

1) 50 day MA at 20.05
2) 200 day MA at 19.05 inching upwards
3) 20 day MA at 19.27 also curving upwards
4) 5 month down trendline that was acting as resistance till now should now act as support - also providing support at 20
5) upside trendline from the move which started in last week of December also providing support at 20

Here is the downside:
1) Closed at the lower end of the range today
2) High volume on pullback today
3) Resistance at 23

So, here are your options on how to play this:
1) Wait for it to cross 23 on high volume if you are a momentum trader. Stop below 23 or 20 depending on your tolerance of loss
2) Wait for a test of the 20 area and then go in with a stop below 20. Give your stop some room
3) Enter now and stop below 20

The above options obviously depend on your style of trading and loss tolerance. As you said in your comment, the big variables are obviously the market and the stock earnings.

Hope this helps! Good Luck if you decide to play it and let me know if how it works out for you.

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