This coming week will likely be tough to pick charts that offer a lot of short-term value but with the possibility (even probability) of the following week showing strong moves down, shorts will continue to be the favorite play.

I do show a couple of "high probability" trades on the short side this week. If my evaluation of the indexes resuming their downtrend and making new lows in the next couple of weeks comes to fruition, some of these mentioned trades this week could turn out to be home-runs.

SBUX (Friday Close at 18.29)

SBUX has been in a major downtrend of consequence over the past 15-months since it reached a high of 40.01. The stock has broken several major support levels on the way down (the most recent the most major support at 22.98 as well as another important support at 22.49) and now finds itself struggling at the last support level of any consequence before a drop down to the $15 level. The stock has not shown any ability to generate any kind of a rally of consequence during this downtrend.

During the last 7 weeks, SBUX seems to have found a support level that has been able to turn the downtrend into a temporary sideways trend as the stock has been trading between a low of 17.66 and a high of 21.01 for this period of time. Nonetheless, over the last couple of weeks, the chart seems weakening once again and seems to be on the verge of resuming the downtrend once again.

Support has been consistent during the past 7 weeks between 18.11 and 18.26, on a daily closing basis, but that area/level has been seen on 4 different occasions and such a conglomeration of low closes around the same price makes the area very likely to be broken. Below the $18 level of support there is no major support in the stock until the $10 level is reached. Some minor support will be found at 15.04 but only enough to slow the decline down for a week or so. Resistance has been trending lower recently, as each previous high close has been lower than the previous one, at 20.45, 19.97, 19.10, and the most recent at 18.85. The most recent intra-day high was at 19.25 and that rally went up exactly to the 20-day MA and failed to get above it. Strong resistance, on a weekly closing basis, is seen at 19.76.

With the indexes likely to resume their downtrend within the next couple of weeks and the support seen in SBUX at the 18.10 area seemingly fragile and weak, it seems highly likely the stock will continue to break down to the next minor support level at 15.10. The $18 area is the last bastion of support, though minor in nature, before another major down move gets hold of the stock.

Sales of SBUX between 18.50-18.77 and placing a stop loss 20.00 and an objective of $10.10-11.40 will offer a risk/reward ratio of 5-1. If a more sensitive stop loss is desired, it can be placed at 19.35. If just looking for a more reachable short-term objective, it would be the 15.10 level. In that case and using the 19.35 stop loss, the risk/reward ratio would be 4-1.

My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).

AA (Friday close at 35.72)

AA, a few weeks ago, broke all the way down to the 26.69 level from a high of 37.48, when oil prices went above $100 and the indexes were dropping. Since that drop, AA has been able to recover over 95% of the drop in price after reaching a high of 36.43 this past week. Nonetheless, none of the reasons for the drop have disappeared and with the indexes likely to resume their downtrend soon, there seems no reason to believe that AA will not do the same.

Since the Jul07 high at 48.77, AA has been in a downtrend, and the most recent rally is only the second wave of what is likely to be at least a three-wave move down. The initial drop took AA from 48.77 down to 30.25 (first wave). The subsequent rally took the stock back up to 40.70, which was then followed by the recent drop to 26.69 (second wave). With this most recent rally back up to 36.43 (last Thursday's high) it seems that the stock has run up near the top of this rally (strong resistance nearby) and generate the third wave down.

Resistance in AA is very strong at 37.41-37.85, on a daily closing basis, as those levels, if broken, would give a buy signal. In addition, this past week, AA got up to the 100-day MA as well as the 20-week MA and the recent rally now seems to have run into an area of resistance difficult to break without outside help, such as the indexes rallying. Support is quite strong at 33.29, on a weekly closing basis, and at 33.65-33.90 on a daily closing basis. At those prices, the 50-day MA is also currently trading at. There is also some decent support at 32.14 (most recent daily low close as well as 20-day MA), and minor support down at 31.92 and then again at 31.00, all of these supports, on a daily closing basis. There is also strong support at $30 from a psychological basis as well as three intra-lows at that price.

The weekly chart shows no re-test of the recent lows and no weekly support of consequence until the 30.25 level is seen. A move down to that price seems highly likely if the stock fails at the resistance levels mentioned above. Keeping in mind the 3-wave rule, it seems likely that if AA breaks below the recent intra-day low at 26.69 that a drop down to the $20 is possible even though strong supports are also seen at the $25 and $23 level.

Sales of AA between 36.43 and 36.66 and placing a stop loss order at 38.07 and having an objective of at least 30.25 will offer at least a 4-1 risk/reward ratio. Keep in mind that I do believe the stock will have a third-wave down and see a drop to at least the $25.00 level. Such a drop would offer a risk/reward ratio of at least 7-1.

My rating on the trade is a 7.5 (on a scale of 1-10 with the strongest probability rating being 10).

RX (Friday closing price 24.44)

RX is a stock that has been in a well-defined trading range between $34 and $13 for the last 10 years. The 10-year high was made on Jan99 at 34.19 and the low was made on Jul02 at 12.90. Since the low was made, RX got into a 5-year strong up-trend that reached a high of 33.12 in July of last year. The rally up to 33.12 was a major retest of the previous high at 34.19 but failed to generate a breakout. After that failed attempt, the stock began to falter and after another re-test rally back up to 31.56, the stock began a nose-dive which culminated with a gap down opening and a one day drop from 29.66 to 21.20. The drop was likely due to a negative news report the previous day.

Since then, RX has traded as high as 25.24 and as low as 20.01 and seems to be settling into a new trading range between $20 and $25. If there are to be any surprises regarding this trading range they would likely be to the downside.

There is very strong resistance between 24.60 and 25.24 from 6 different weekly closing rally highs between those two levels, as well as countless times the stock closed in that same range on a daily closing basis. In addition, the gap area is between 29.04 and 25.24. Already the stock has attempted of 7 different days to begin closing the gap. All attempts have failed at or very near to 25.24. It is also important to note that the stock rallied this past week up to the 100-day and 20-week MA's, both currently right around the 24.80 level. Support is found intra-day at 22.97 and then again at 21.20, but both of these supports are considered minor in nature. Major support is found down at the $20 level as there have been three major lows at that price over the past 10 years.

At this time RX is trading near the top of the trading range and close to very strong resistance levels which have not shown any inclination to bend or break. With so many failed attempts it is likely, now that the indexes also are showing a tendency to falter, that the stock will try to go back down to support levels and try to build a stronger support base from which to generate a future rally. It is also important to note that on January 1, RX had a strong intra-day move from 20.01 to 24.11. The subsequent mini correction only took the stock down to the 50-day MA at 22.74. This means that from 22.74 down to 20.01 there has been no trading since that day. Such a large non-trading range is susceptible to a fast break down and re-test of the 20.01 level should the support at 22.74 be taken out.

Should the $20 level of support break, something that could happen if the indexes decide to make new lows (something I believe will happen), RX could have an immediate drop down to the $17 level and perhaps ultimately re-test the 10-year support down around $13.

Sales of RX at Friday's closing price of 24.44 and placing a stop loss 25.62 and an objective of at least $20.01 would offer a risk/reward ratio of 4-1.

My rating on the trade is a 8.5 (on a scale of 1-10 with the strongest probability rating being 10).

PDCO (Friday closing price 33.36)

PDCO is a stock that from 2003 to 2005 was in a major up-trend that started at the 18.03 level and culminated with a high of 53.56. After that high was made in May05 PDCO got into a very strong and well-defined downtrend that caused a drop down to the $32 level by Jan06. Upon reaching that low, PDCO got into a sideways trend between $30 and $40 dollars for the next 18 months.

In October and then again in November of last year, PDCO attempted on several occasions to break out above the $40 level but was unsuccessful in accomplishing its goals. On Nov 20th the stock gapped down from 36.92 to 33.20 and that move down put the stock into a totally defensive mode trying to hold on to its previous 18-month trading range above $30. The defensive mode failed because the very next day after the gap down, PDCO saw the support at $30 broken with a move down to 28.92.

During the last 13-weeks PDCO has recovered from that impressive drop and rallied back into the gap area with a rally up to 34.81. Nonetheless, the stock has not been successful in getting above that resistance level and is beginning to show signs of faltering once again.

Resistance is very strong between 34.81 and 35.18 from several previous highs and one major low in that price range. In addition, the 20 and 100-week MA are all at or right below $35 and the 50-week MA presently at 35.80. Support is minor at 32.50 and then a bit stronger at 31.80. On a daily closing basis the 31.43-31.53 level must be considered strong as well as short-term important support. Below that, some decent support at 30.98 as well as 29.91.

Probabilities are strong that PDCO is likely going to trade between the $35 and $30 area for the next few weeks. Nonetheless, the break of the $30 area in November, suggests that it is also possible that the stock is going to start a new downtrend which will ultimately take it down to the next major support area at $20.

Sales of PDCO between 34.14 and 34.49 and placing a stop loss at 35.28 and an objective of 30.00, will offer a risk/reward ratio of 4-1. Potential for much more than that is also a strong possibility if the 30.00 level does not hold up.

My rating on the trade is an 8 (on a scale of 1-10 with the strongest probability rating being 10).