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Play of the Day (For Thursday)
Interactive Chart
Wednesday, May 02, 2001

WSM - Williams Sonoma, Inc. $31.70 +0.60 (+2.40) 4)

Tuesday's Comment:

Specialty home retailer Williams Sonoma continued to build on yesterday's breakaway gap from $29.00. What's more, today's move comes on volume nearly double the three-month average daily volume of 551,000. WSM has been the beneficiary of a resurging retail sector. Over the past week, the S&P Retail Index (RLX) has surged ahead 7.2 percent. At this point, WSM has made room to run higher. The stock has taken out resistance at $30 along with its upper Bollinger band at $30.56. With these resistance levels out of the way, it appears to be smooth sailing until $40. As for support, traders can look for $30 to provide the first level, followed by the 10-dma at $28.08. Traders considering a position in WSM should look for strong volume, 250,000 shares or more traded by noon EDT, on a move through today's intra-day high of $31.40 or a bounce off support at $30.00 before placing their trades. We are placing our stop-loss at $27.75, which is just below the 200-dma.

Wednesday's Update:

WSM continues to distance itself from its recent base formation. This is a great sign for the longs, since it goes to show that those who bought within the base are now letting their gains ride instead of selling for a profit. This keeps the supply of stock available for sale at a minimum and makes for nice upside moves when buyers show up (as they have over the past three days). Looking at the chart, we notice that WSM is now 5.6% above $30 (the top of its base). We generally don't want to chase a stock much more than 8% above its base formation on a breakout move. Given WSM's current price level, there still may be wiggle room if you are considering entering a new position in the stock. You don't want to chase it beyond $32.40, but any entry up to this point may prove to be a low risk buy-point since we still have the base below as a safety net should WSM reverse course. In addition, use strength in the S&P Retial Index (RLX.X) to confirm your entry. That being said; be prepared for WSM to cough up a portion of its recent gains due to the fact that the stock is starting to get overbought. Should this happen, watch for volume to come in low, as this will be your sign that the selling pressure is nothing more than a little profit taking, rather than a change in momentum.

Picked on May 1st @ $31.10
Change since picked +0.60
Stop Loss @ $27.75

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