Southwestern Energy Dropping Hard

04/14/11 08:02:26 AM

by Donald W. Pendergast, Jr.

Although shares of Southwestern Energy have taken a hit lately, some trading systems are suggesting that a larger decline may be in the cards for this energy stock.

Security: SWN
Position: Sell

Since peaking late last month, Southwestern Energy (SWN) has been on the fast track to lower altitudes, dropping more than $5 per share in a two-week period. However, one of the more interesting expert advisor trading systems in MetaStock 11 has just signaled its intention to short SWN. Raff MarketSpace Stock system can be applied to any chart of interest in just a few moments, just as you can scan your entire stock or commodity database for new signals by using MetaStock's Explorer, and all in a matter of moments.

Here's a basic look at the trade setup, along with a few observations on how you might want to use this particular short signal to get the most out of any further weakness in this stock. See Figure 1.

FIGURE 1: SWN, DAILY. The Raff MarketSpace Stock System appears to be in general agreement with the major trending moves in shares of Southwestern Energy.

Graphic provided by: MetaStock.

Graphic provided by: Gil Raff expert advisor from MetaStock 11.

A few of the nice aspects of this particular short signal are:

* The signal has printed right after a breakaway gap.
* The signal bar is also of a relatively wide range.
* SWN has weaker comparative relative strength than the Standard & Poor's 500 (.SPX) over the past 13 weeks.
* The short signal also occurs in the wake of a complete breakdown of the Keltner channel midline (a 45-period exponential moving average [EMA]), giving further confirmation that the stock may have some more room to go on the downside.

Placing an initial stop for this trade is up to the trader; some who prefer to stay with a developing trend might place their initial stop above the March high near $44 (limiting the trade risk to their account to no more than 1% to 2% of its value). More aggressive traders with modest profit targets might do just as well to set the stop just above that Keltner midline, and then resorting to a two- to three-bar trailing stop of the daily highs to help retain some of the open gains and/or further limit losses on the trade, should it not pan out as planned.

Donald W. Pendergast, Jr.

Donald W. Pendergast is a financial markets consultant who offers specialized services to stock brokers and high net worth individuals who seek a better bottom line for their portfolios.

Title:	Writer, market consultant
Company:	Linear Trading Systems LLC
	Jacksonville, FL 32217
Phone # for sales:	904-239-9564
E-mail address:	lineartradingsys@gmail.com
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Southwestern Energy Dropping Hard

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