NEW YORK (TheStreet) -- Anyone who spends time in the financial markets quickly learns that everything about an efficient market learned in school can get thrown out the window.
Some may question the use of and utility of technical analysis. Technical analysis gets a bad rap because so many "gurus" haven't put the time or the effort needed into learning the difference between a pattern and what is random noise. A sure sign of weakness is someone giving advice without knowing the odds and expected edge.
Technical analysis is like sex: Most think they perform a lot better at it then they really do. If someone says "this stock is good/bad because of _________(add reason here)," ask them how many other similar situations like the current one they have back tested and what is the odds, risk and edge. If all you hear is crickets in the background, you will know how much weight to give the advice.
Here is a list of six stocks that are oversold on the weekly charts. My preferred method to exploit the weakness is to sell put options or write covered calls (pretty much the same thing). The average trade lasts three to four weeks. I am boring, so I like selling time premium, but others have successfully adjusted and use call options to liven up the party.
Polycom Inc (PLCM) develops, manufactures and markets a full range of high-quality, media-rich communication tools and network solutions. The company was founded in 1990 and is headquartered in Pleasanton, Calif. Polycom trades an average of 2.9 million shares per day with a marketcap of $1.8 billion.
Polycom has a relatively small short interest for a stock beaten down this much. About 5.36% of the float was reported short in the latest numbers. A 5% short interest will add fuel to a move higher.
Currently, the total number of buy recommendations is four, and 10 analysts believe the best course of action is to hold. The average analyst target price for PLCM is $14.78, and the 200-day moving average is about $15.50. The 200-day moving average is where Polycom will find the next greatest resistance.
I am most attracted to the July $10 strike put options for 55 cents or more if they can be sold this week. My profit target is 45 cents.Ctrip.com International(CTRP) is a leading travel service provider of hotel accommodations. The company was founded in 1999 and is headquartered in Shanghai, China. Ctrip.com trades an average of 3.2 million shares per day with a marketcap of $2.4 billion.
I am not a big fan of Chinese stocks due to the lack of SEC authority over them. That said, based on the chart setups, CTRP is oversold.
I should add that I have used CTRP many times and found the service very good. One person's opinion on service is not a make or break reason to invest in a company, but what is important is that I can confirm they are a real company and very popular in China.
Currently, the total number of buy recommendations is three, and nine analysts believe the best course of action is to hold. The average analyst target price for CTRP is $24.00, and the next resistance level is near $22.75.
I am most attracted to the July $16 strike put options for 55 cents or more if they can be sold this week. My profit target is 50 cents.
Petroleo Brasileiro (ADR)(PBR) is an integrated company operating in exploration, production, refining, retailing and transportation of petroleum and its byproducts at home and abroad. The company was founded in 1953 and is based in Rio de Janeiro, Brazil. Petroleo Brasileiro trades an average of 19.7 million shares per day with a marketcap of $72.9 billion.
The total number of analyst buy recommendations is two, and four analysts believe the best course of action is to hold. The average analyst target price for PBR is $31.80.
The trailing 12-month price-to-earnings ratio is 6.8, the mean fiscal-year estimate price-to-earnings ratio is 7.21, based on earnings of $2.72 per share this year. Investors are receiving 11 cents in dividends for a yield of .55%.
Short interest is very low with only 11 million shares out of a float of 3.6 billion shares short. Oil is in a downward bear trend; however, a dead cat bounce that may help PBR is likely.
For a quick hit and run, I like the $17 strike put options that expire this Friday for 16 or more cents. These would most likely have to be sold on Tuesday to make it worthwhile. Otherwise, I equally like the July $17 strike put options if they can be sold this week for 55 cents each. My profit target is 45 cents.
Electronic Arts(EA) operates in two principal business segments globally: EA Core business segment, and the EA.com business segment. The company was founded in 1982 and is headquartered in Redwood City, Calif. EA trades an average of 6.6 million shares per day with a marketcap of $3.9 billion.
Short interest is small at 4.4%. In the last month the stock has fallen 13.78%.
The total number of buy recommendations is 12, and seven analysts rate EA a hold. The average analyst target price for EA is $20.75. The 52 week low is $12.
I am most attracted to the July $12 strike put options for 41 cents or more if they can be sold this week. My profit target is 35 cents.Bill Barrett Corp.(BBG), headquartered in Denver, explores for and develops oil and natural gas in the Rocky Mountain region of the U.S. Bill Barrett Corp. trades an average of 1.9 million shares per day with a marketcap of $830 million.
BBG has a very large short interest of 14.2%. This is more than enough to squeeze the shorts if the price begins to move higher.
The average analyst target price for BBG is $34.20, and major resistance doesn't appear before $25.
I am interested in the July $15 strike put options for 25 cents or more if they can be sold this week. My profit target is 20 cents. Option liquidity is not very good so a simple buy of the stock may be advantageous over trading options.ProShares UltraShort S&P500 ETF (SDS) trades an average of 21.3 million shares per day.
I am not a big fan of ETFs in general (other than a few key select ones), and my desire to hold a leveraged ETF overnight is right up there with having the power go off in my office during the last hour of trading on option expiration day.
Because of the way leveraged ETFs work, the best way to trade them overnight is through options. I would not consider a stock trade here. I like the July $16 strike put options for 28 cents or more with a profit target of 20 cents.
This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.
Robert Weinstein
06/26/12 - 07:46 AM EDT
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