After a 40% rally off the November lows,
gapped up and rallied another 6.7% on Jan. 30, taking its chart
from a steep ascent to a vertical one. From a longer-term
perspective, Manpower looks promising once these insanely
overbought conditions subside in the near term. In the meantime,
thestock is setting up for a high-probability, short-side swing
trade for quick 6%-8% profits with very defined risk.
Before I make my case for shorting Manpower, let me be clear
that this is a short-term trade. I would not advise betting against
the stock in the longer term.
On the weekly chart, the stock formed a respectable higher low
in 2011 and 2012 versus the 2009 lows. The higher low, however, has
not yet been confirmed by a new higher high, which is another 33%
away at the April 2011 highs.
As such, making a new higher high versus the April 2011 highs
should not be the focus of analysis in the medium term. A more
reasonable focus for when the stock has confirmed further
longer-term technical strength would be a break past the downtrend
line dating back to the highs from the summer of 2007.
My reason for concern regarding furtherupside in this stock's
price in the near term is mostly related to the severely steep
slope of the chart. Along with the broadermarket , Manpower found a
solid bottom during the summer of 2012, and rallied hard into the
end of the year. After an already steep slope into late January,
where the stock retested its early 2012 highs, Manpower paused for
one mere day before going vertical, rallying another almost 8% in
The end result, which can be seen on the chart below, is a slope
that during the past six months has become incrementally steeper.
As a general rule oftechnical analysis , barring certain corporate
finance activity orstocks in the pharmaceutical or biotechnology
groups, the steeper a slope, the sharper an eventual mean-reverting
Before discussing potential stop-loss andprofit target levels
for this trade setup, let me point out the overbought conditions in
the stock from a momentum point of view. After the massive run
Manpower has displayed of late, one would expect momentum to be
overbought, and it is as evidenced by thestochastics and
Wilder'sRelative Strength Index (RSI) .
Keep in mind that this is a short-term swing trade. We are not
yet seeing any negative divergence in the stock. In other words,
price and momentum indicators have been rising in sync. As such,
from a longer-term perspective, it is difficult to view current
levels as a meaningful top.
Back to a chart focusing solely on price, Manpower's most recent
breakout past the early April 2012 highs is one that, at the very
least, should be retested before the long side can again be traded
with better probability.
A first attempt at a short-side swing trade in the stock can be
made at current levels given the overbought conditions and vertical
slope in the chart. Due to the lack of anybearish candlestick chart
developments, a tight 3%stop-loss order should be used. The
logicalprice target is the April 2012 highs in the $47-$48
Action to Take -->
Sell MAN short at $51.20 or higher. Set stop-loss at
$52.75. Set price target at $47-$48, for a potential 6%-8%
gain in 3-4 weeks.
This article originally appeared on ProfitableTrading.com:
This Overextended Stock Could Make Sellers a
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