Once again with the thought that the indexes may be at or near their mid-term top it seems right to be looking at short positions.

SVNT (Friday close 15.14)

SVNT has been a strong stock since Aug06 and has rallied from its break out point of 6.16 to a recent high of 15.75 made just two days ago. In many ways this stock looks like the DOW.

There are a few reasons why I am mentioning this stock as a short, starting with the fact that the risk/reward ratio is excellent, the stop-loss point clearly defined, and a reversal Friday of the new 5-year high (made on Thursday) likely to be considered a failed breakout. In addition this stock left a gap down at 11.89-12.25 which will act as a magnet.

SVNT did move down to the 20-day MA on Friday as well and closed near the lows of the day.

SVNT has also been acting very toppy after its strong up move over the past few months. Two weeks ago the stock made a new high at 15.66 and immediately fell back to 14.37. It then recovered and Thursday of last week made a new high at 15.75 and immediately fell back again to 15.01 and closing at 15.14 which is a level it has closed out several times during the last 2 weeks.

Using the weekly charts SVNT has only had one corrective phase which happened on Dec06 with a drop down to 10.69. The 20-week MA is currently just around 10.69 and the gap at 11.89 looms strongly as a magnet now that the stock has shown a measure of weakness or at least lessening strength over the past 14 days.

Any rallies in SVNT up to 15.45 can be sold with a stop-loss at 15.85 looking for a drop down to 14.02 (weekly support) and if broken perhaps a drop down to fill the gap at 11.89. There is some daily support at 14.87-14.92 which has shown itself to be pesky. If that level is broken not only will that support be gone but SVNT will find itself trading below the 20-day MA and only 14.02 to hold a possible drop to the 50-day MA at 13.07.

This definitely is a trade that is likely to be successful if the indexes break, as the charts look incredibly similar. Risk/reward ratio considering a drop down to fill the gap at 11.89 would be 9-1. If a drop down to the 50-day MA is considered then the risk/reward ratio would be 6-1.

My rating on the trade is a 6.5 (on a scale of 1-10 with the strongest probability rating being 10).

KGC (Friday Close at 13.25)

KGC has the potential of being a two-sided play. That means that if the stop-loss area gets hit it would likely be a good long.

After making a new 6 month low on 1/5/07 at 10.64 KGC rallied almost straight up to a major resistance at 13.60 (rallied to 13.54) and failed to break through. In two days it dropped almost $1 and then attempted to rally back up but was only able to rally up to 13.42 where it failed to sustain the rally and the stock closed in the red.

On Thursday KGC had dropped down to 12.77 where it hit the 20-day MA which means that the breakout/breakdown levels are rapidly closing in on each other with 13.60 on the upside and 12.77 on the downside.

In looking at both the daily chart and weekly chart, it seems that KGC is in a trading range between 13.60 and 10.60. With the probable correction in the indexes coming closer each day, it makes sense to believe KGC will once again be looking to drop down to the low side of the trading range.

On the other side of the coin a break above 13.60 would likely thrust KGC to test its 4-year high at 15.39 since there is no visual resistance in the chart.

A short position can be instituted at the closing price of Friday at 13.25 using a stop-loss reversal at 13.66. The highest close on KGC for the past 4 months has been 13.30 so keep that price in mind as well. Should the stop-loss be hit and a long position instituted the 13.30 area, on a closing basis, would be very important and long positions would need to be liquidated if the stock breaks out but then fails to close above 13.30. There is support at 12.77 from the previous low plus the 20-day MA and then down at 12.67 from another semi-important low. After that there is nothing of consequence until 11.27.

Based on this history of this stock since Sep06 the probabilities of the stock going down from here are relatively strong. Add to that the index factor and this short position could be one to add to your portfolio. My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).

ZOLT (Friday close 26.74)

ZOLT has had a strong rally since Xmas week when it tested a 10-month low at 17.39 with a drop down to 18.34. Since then ZOLT has rallied straight up with nary a correction to Friday's high at 27.39. That rally could be considered a re-test of the major resistance at 28.38 and high close at 27.99.

Though ZOLT closed in the green on Friday it failed to close above the previous high close at 27.02 even though Friday's action could have been seen as a breakout from a flag formation that had been in the making during the past 7 trading sessions. The close below 27.02 failed to confirm the breakout and is likely to cause ZOLT to be under some short-term pressure.

The 20-day MA is currently right around 25.60 but other than that there is no support of consequence until ZOLT goes down to 23.50. Below that level the next level of consequence, both on the daily and weekly charts, is 21.00-21.97.

ZOLT is severely overbought and up against a major daily and weekly resistance level at 28.38, which seems mountainous to get over right now. With Friday's semi-failure to break out and confirm the flag, rallies up to 27.00 can be sold with one of two stop loss areas to consider. On a very sensitive scenario a stop loss at 27.49 (Friday's high) can be placed thinking that the breakout was false and that level will not be seen again. Looking at a minimum drop down to 23.50 and a possible drop to 21.97 the trade would offer a 7-1 or a 10-1 risk/reward ratio. If 28.48 is used as a stop loss area (more secure but more risk) the risk/reward ratio on the trade would drop down to 2.5-1 and 4-1.

Once again a short trade in ZOLT would take advantage of a possible break in the index while getting rid of the overbought condition that exists. In addition, based on the weekly charts, it is more than probable that ZOLT is presently in a trading range between 28.38 and 20.00 and that it is now near the top of that range.

My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).

PMCS (Friday close 6.76)

PMCS is a low priced stock with some clearly defined upside potential for the short term. For the past 6 months PMCS seems to be in a trading range between $6 and $8 and on Wednesday PMCS was able to close above the 50-day MA and has had two subsequent closes above it as well confirming the breakout.

PMCS also was able to get above the 20-week MA last week and closed the week at the highest weekly close in 6 weeks. Additionally the 6.72-6.66 weekly closing price has been a level of contention since Aug06 and Friday's close, though just barely above that price level, does signify that PMCS could be heading up toward the $8 during the next few weeks.

Tuesday's low at 6.40 was right on the 20-day MA and after that PMCS made a new 8 week high thus confirming that 6.40 now has to be considered an important support level for the short term.

Purchases between 6.66 and 6.76 can be considered with a stop-loss at 6.34 looking for a rally up to the 8.00 level. Such a trade would offer at least a 4-1 risk/reward ratio. My rating on the trade is a 7 (on a scale of 1-10 with the strongest probability rating being 10).