I've posted this before, and don't really want to sound like a broken record, but MDT looks like a compelling short to me:
askresearch.com
It is now overbought and showing sell signals at a level which has in the past offered strong resistance. Specifically, MDT has been sharply turned away from the 55-57 level four separate times since March, each time on heavy volume. Put/call open interest is somewhat more bearish this time however, standing at 0.69. Also, there is significantly more open short interest, roughly equivalent to three or four days' trading volume. If MDT were to successfully overcome resistance at 57, then this short interest could add a tailwind to the stock as the squeezed shorts scramble for cover.
OTOH, 12 days ago, the stock was upgraded from "buy" to "strong buy" by CSFB. I view this as a contrarian sell signal, just an attempt to sucker in the last of the retail investors in time for a fall. And, MDT has indeed risen about 5% since this upgrade. The last change in analyst recommendation was on August 2, an upgrade to "buy" from "hold", by ABN AMRO. At the time, MDT was trading at about 54 1/2, and moved from here to again challenge the 55-57 resistance area. Six days after this upgrade, the stock failed at this test, selling off strongly over the next month, to a low of about 47.
My view is that these "upgrades" are primarily designed to lure retailers into the stock, then the big boys muscle the stock down, separating the retailers from their money once again. I think this will occur again, very shortly. That is, the bears are running things here, and playing a repetitive game of taking big long positions, then trotting out an analyst for an upgrade, waiting for the full effect of that upgrade to sucker in the retailers, then suddenly selling those big long positions after entering big short positions. MDT moves down hard as a result of this big sudden selling pressure, the retailers who bought panic, and add fuel to the fire by selling. Then, after a sufficient profit, these same players cover their short positions and convert to a long position, reversing the stock and readying things for another round.
So, this would not be an easy money short, and would require vigilance. Still, the market trend, the chart, the technicals, and history are all in its favor.
As always, JMVHO............
Disclosure: Short via Jan 55 puts.
Regards,
Walkingshadow |
