Charts of the Week, Monday March 5th, 2007

Charts of the Week are stocks that appear to be attractive candidates for short- to intermediate-term (2-6 weeks) returns based on analysis of their daily or weekly chart formations and underlying technicals. Support levels may be used as possible stops.

Analysis: MER: (SHORT): Merrill, the leader of the pack in terms of the largest retail firm, had a very strong bull market move since its 2002 lows in the high 20s, taking it all the way up to just under 99 in January before a pretty dramatic pullback, which accelerated over the last 2 weeks. The stock came down hard on heavy volume early last week before bouncing and is near 1-year support around the 81 , area. So we're anticipating the potential of a bounce which retests resistance around the 84-6 zone over the next several days, and would consider initiating shorts at that level. Trading targets are at the long-term rising trendline and lateral price support in the 74-5 area, followed by secondary target around 66 and potentially much longer-term target in the low-to-mid 50s. Price and moving average resistance is at the 90-92 zone, and anything over 94 would be potentially a stop if the stock is entered in the mid-to-high 80s.

Analysis: BSC: (SHORT): Bear Stearns has had a bull market run from the 2002 lows near 50 to the highs in Jan up near the 172 area, so a more than 200% gain in that period of time. The stock gave an indication of potential weakness by breaking hard for a couple days in mid-February, but recovered, only to roll over much harder on much heavier volume and a strong downside thrust in technicals. Last week the stock bounced near the 146 area, which is lateral price support (the 144-146 area) going back to last April, so we're anticipating the possibility that although we may see additional downside to that 143 ,-144 , area as early as Mon morning, that represents strong lateral price support and the bottom of the up-channel. We're anticipating the potential of some snapback later in the week, which could take it to retest what looks like strong resistance down around the 154-55 zone. Above that, the 161-63 area is the moving average, but I'm not anticipating a move back that strongly. Targets are at the 135, 125 and 112 levels short-, intermediate-, and longer-term, with a stop above the 164 zone.

Analysis: MS: (SHORT): Morgan Stanley has seen a 4-year bull market run from under 29 to as high as 84 in January. But the stock, as most others in this group did, rolled over and took out lateral price support, gapped down on heavy volume, and is currently testing secondary support. I'm anticipating the potential of a bounce after some early weakness next week, and a move back up to that 76-77 zone would be potential good place to initiate shorts. Downside targets are 66, 61 and 55 short-, intermediate, and long-term. Heavy overhead resistance is up around the 79-80 zone.

Analysis: GS: (SHORT): Goldman Sachs, the darling of the group, had a phenomenal run, moving from the high 50s in 2002 to as high as 222 just a week ago. It broke hard last week on very heavy volume, reaching initial support, bouncing around for a couple days. That support is at the 194 area. Should that break we would look for additional weakness to around the 185-86 zone, intermediate target at 155, and longer-term target at the 138-40 zone. Resistance and potentially an area to consider shorting is up around the 206-08 area.