The last several months, because of the market chop,we have been trading using ETFs in directional market trades and not stock picking, but a few weeks ago I said as a trend starts to develop and sector rotation begins again, we'll be looking at specific stock ideas and the first place we will be looking is in the financial sector.
One of the first short trade calls was last week on JEF (Jefferies) and it is in the model portfolio as a short.
This was certainly a great place to short it and as far as candlestick analysis goes, this is a perfect Harami reversal.
This is where I started entering JEF last week as the long lower wicks indicated a bounce and the long upper wicks (red) indicated that higher prices were being rejected and JEF was losing momentum, that has culminated in two ugly topping candles and JEF still looks like a good short entry right here.
Short term 3C shows distribution as JEF rolls over, the negative divergence or distribution of the bounce you can see was around the same time we saw the candles in the chart above with the long upper wicks.
The 5 min chart is leading negative and this appears to have been nothing more then a counter trend bounce, which makes it an attractive area to consider shorting the brief price strength.
The 10 min chart is very ugly as well.
However the 15 min chart really tells the story of the longer term weakness in JEF.
My only concern and the place where I will be watchful is at the long hammer day at the start of November which offers support, that's where the most recent bounce started. A break of that level will be significant and likely lead JEF down very quickly as stops are more then likely lined up right along the $10 area and support, once they are hit, the downside could be fast and deep. For me, it's a trade worth taking as I have.
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