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Technical Outlook: LJPC, SQNM, CY, RTK

|Includes:CY, RTK, SQNM

La Jolla Pharmaceutical, Cypress Semiconductor Corporation, Sequenom , and Rentech may be your best trading bets for the near future.

Though Wall Street is modestly in the red today, a handful of stocks look like they're just now gearing up for a move.... some up, some down. Of the few that look trade-worthy, Cypress Semiconductor Corporation (NASDAQ:CY), La Jolla Pharmaceutical Co. (NASDAQ:LJPC), Rentech, Inc. (NYSEMKT:RTK), and Sequenom Inc. (NASDAQ:SQNM) appear to be the best of the bunch. Here's a closer look at each chart.

Sequenom Inc. (SQNM) has certainly doled out its fair share of up and down, but to the stock's credit, it is making good on breakout efforts. Today's high-volume surge today is reminiscent of the one from July, which followed through from the low $4's to above $6.

Moreover, the bounce materialized at a major support line, and a ceiling/target well above current levels has been established.

While it's not clear if SQNM has enough juice to fully close the April gap right now, it seems to have enough fuel to at least test that near-term resistance line.  Thus, we view Sequenom as a short-term buy.


 

Though the lack of volume behind the pullback from Rentech, Inc. (RTK) over the last two weeks doesn't scream that investors should worry, the persistence with which RTK is sliding lower should be a concern for Rentech owners.

The problem is not one, not two, but three bullish gaps made in August. We applaud the stock's boost, but high-flyers fall fast. RTK was overbought, and will need to be reigned in. The fact that Rentech hit also hit resistance around $2.50 in July of last year - like it did a couple of weeks ago - tells us there's a pretty tough ceiling there.

We're targeting a move to $1.14 for RTK, where we've seen support recently. After that, Rentech could go either way; we don't implicitly assume that the stock will have to close every gap. 
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Cypress Semiconductor Corporation (CY) may be on the verge of a breakdown, so take all of this with a grain of salt.

Semiconductor and semiconductor equipment makers had a great run from March through last month, but as a group started to weaken then - much more so than other industries. For instance, the S&P 600 Small Cap Semiconductor Index was one of the few that did NOT reach new 52-week highs last week.

That said, neither the index nor Cypress Semiconductor shares have technically broken down yet. Their relative weakness is a red flag though.

The key here will be a tumble under a major support line (blue) currently at $9.80. Won't CY just bounce up and off of it like every other time? Possibly, but this time the bears have the advantage of something of a blowoff top for Cypress shares back in July. That overbought situation should let CY develop some bearish momentum on the way back down to support... .allowing it to plow through it this time.

It's still a waiting game in the meantime.


 

Today's big 20% rally from La Jolla Pharmaceutical Co. (LJPC) is exciting to be sure, and the high volume move is getting attention. It should be noted, however, that this is nothing we haven't seen from LJPC before. None of the prior breakout moves have really been worth latching on to.

Part of the challenge for La Jolla Pharmaceutical shares is a simply lack of support - lack of news - to keep prodding interest in the stock. The other problem may be that many of these bursts were also generated without any news regarding LJPC. Investors just need something to justify decisions. If they don't get it, they won't stick to it (and they haven't, as we've seen from LJPC over the last several months).


 

If you'd like to know of any changes in our opinion of these four stocks (or if we officially recommend them as trades), be sure to sign up for the free newsletter today. It's delivered 2 to 3 times per week.
Stocks: , CY, RTK, SQNM