With the indexes likely to be in a well defined trading range for this next week and not likely to help define direction each stock will need to be considered on its own merits. Weak stocks should be sold on rallies and strong stocks bought on dips. Nonetheless the indexes are still in a corrective phase so shorting weak stocks will likely offer better results.

RMBS (Friday Close at 20.07)

RMBS continues to look like a stock that is ready to break down. If you did not go short RMBS this past week on the rallies up to the 20.75 level you still have an opportunity to do so this next week.

RMBS is presently trading below the 20-day MA which is currently right around 20.73 and at the 50-day MA which is right at 20.07. This is a stock that seems to be breaking down but should it rally and reverse itself to the upside the break out to the upside also offers value.

This past week RMBS attempted to close the gap between 20.85-21.01 on several occasions without success and now shows a formation which might be considered am inverted pennant. This formation, if broken out on the downside (a print of 19.62), will have an objective of 16.57. If broken out on the upside (a print of 20.83) an objective of 22.83.

Since the formation is leaning more to the downside, especially since the indexes are likely to show weakness in the beginning of the week, short positions should be entered on rallies up to 20.20 or on breaks below 19.67 (19.61 stop). If shorted around 20.20 a stop loss order at 20.83 should be placed. If shorted on the break of 19.67 a stop loss order could be placed at 19.99.

Should RMBS see a print of 20.83 a long position could be started with a stop loss order at 20.24 and an objective of 22.86. Purchasing the breakout is a risky thing due to the outlook for the indexes but if the indexes have gone down and tested their support levels, held, and are on a rally buying the breakout of RMBS could offer value.

Should RMBS break below 19.67 not only will it be breaking the 50-week MA but there is a gap between 17.14-17.31 that is likely to be the first objective and a magnet for the traders. There is decent support in RMBS between 18.87 and 19.13 but should the 18.87 level break there is little in the way of support until 17.47.

A sale of RMBS at 20.20 with a stop loss order at 20.83 and looking for an objective of 16.50 will offer a risk/reward ratio of 6-1. Should the short be instituted on a break of 19.67 (at 19.61) and a stop loss order placed at 19.99 the risk/reward ratio would be about 7-1.

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

MMC (Friday close at 28.85)

MMC, as a short, is a high probability trade with a well-defined profit potential. For the last 2 years MMC has been in a weekly downtrend. It has not been steep but it has been overall consistent.

Using the weekly charts, the down-trend started on Mar05 at 34.25. Since then MMC has had a weekly drop to the 26.67 level, a rally back up to 33.42, a drop to 24.00, and a rally back up to 32.43. It now looks evident that MMC is once again going into a valley period by having broken below the 28.82 support level and having tested the breakdown, on a closing basis, successfully for the last couple of days.

A week ago Friday MMC tested the 50-day MA it broke two weeks ago and failed to get above. It then proceeded to have a reversal day and came within 6 ticks of having a classic reversal day with higher highs, lower lows and a close below the previous day's low. Nonetheless it was a negative day and there was follow through on Monday with the break below 28.82 and the drop down to 28.30. The break below 28.82 shows no visible support until 27.30-27.60 is reached. In addition, there is a gap area between 27.76 and 27.96 that will work as a magnet now that the 28.82 level is broken.

In looking at the weekly charts a break below 28.82 has also broken the 50-week MA and given the objective of testing the weekly support levels between 27.00-26.67. Those levels are very evident objectives.

Last August MMC broke down below those same support levels with a move down to 24.00 so it is possible that those levels will no longer be as strong as they seem to be. A test of the 24.00 support could happen. It is likely, though, that the 27.00-26.67 level of support will hold on this occasion.

If you did not go short on my mention of this stock last week a short position can be initiated between Friday's closing price of 28.85 all the way up to 29.27 using a stop loss order at 20.40. I would not like to see MMC close higher than 28.95 so if that happens you might also consider getting out of the trade.

A stop loss could be placed at 29.40 looking for a minimum move down to 27.00, and therefore the risk/reward ratio would be about 3-1 with a possibility of more.

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

FTEK (Friday close 26.37)

FTEK is a stock that has been mirroring much of what the DOW has been doing. On Feb27 FTEK broke below both the 20 and 50-day MA and dropped all the way down to 22.55 before encountering support.

On Thursday of last week FTEK rallied back up to the 50-day MA and failed to get above. On Friday it tested that level again and then closed in the red and managed to close below the most recent high close (26.50) just prior to Thursday's high close at 26.70. That action created a small failure signal.

FTEK now has a clearly defined resistance level at 26.87-26.99. 26.87 was a major previous low close and 26.99 the most recent high. 26.87 low close was made just prior to the stock making an attempt to make new 4-year highs. On that attempt FTEK was only able to surpass the previous high at 29.60 by only 8 ticks (29.68) and therefore the charts shows a double top at that level.

With the first strong move down to 22.55 and subsequent rally back up to 26.70 FTEK seems to be in the first leg of a major correction pattern. With the risk level so clearly defined and comparatively small FTEK seems like a good short position.

With the DOW likely to be in a down fashion early this week it is anticipated that FTEK could also be under pressure. Resistance is strong between 26.70-27.00.

The intra-day chart shows that the 26.58 level will be very difficult to get above so sales between 26.37 and 26.58 should be attempted. A stop loss at 27.05 should be placed. Minor support at 24.99 to 25.13 will be found but should that level break, the 24.07 level should be the next objective. Below that level you will find support at 23.55 and 22.55.

A weekly close below 25.09 will confirm a break of the 20-week MA and give a possible objective the 50-week MA which is at 18.50. 18.50 is also an important break-out level as that was the price at which this entire recent move up to 29.68 began.

A sale of FTEK between Friday's closing price of 26.37 and 26.58 and using a stop loss order at 27.05 and an objective of a re-test of the recent lows at 22.55 will offer a risk/reward ratio of about 6-1. Should the 22.55 level get broken and a major move down to re-test the break-out level at 18.55 happen the risk/reward ratio could be as high as 12-1.

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

MWA MWA (Friday closing price 13.81)

MWA is a trading range pick as this stock, since its start 9 months ago, has generally traded in $2-$3 peaks and valleys. With the likelihood of the stock indexes being weak early in the week and MWA nearing a major level of support it looks like a stock that could be purchased for a run to the upside for the next couple of weeks.

MWA has shown a very moderate weekly downtrend over the last 9 months and has shown various well-defined rallies and dips during that period of time, in a general sideways type action. In essence, a stock that seems tradable from both sides of the coin (sell rallies, buy dips).

Recently MWA has been dropping and is now nearing a good support level at 13.60. Major support on MWA is at 13.02.

From June06 through November06 the chart valleys, using the weekly charts, were always lower than the previous ones but since the Nov06 low at 13.02 the next valley failed to break that low and generated a $3 rally after. Now MWA is on another valley that is now testing the last one at 13.49 and should the sideways to moderately lower pattern continue a rally of $2-$3, after the low has been set, should be expected.

With the indexes likely to be under pressure on Monday and perhaps even Tuesday it is likely that MWA will also be under pressure and continue to fall from Friday's close at 13.81. Purchases between 13.40 and 13.60 using a "mental" stop loss order at 12.94 and looking for a rally back up to 15.75 will offer a 5-1 risk/reward ratio.

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