4/5/05 -

This chart shows that FDG is at the apex of its long-term uptrend, which is somewhat tenuous because of last week's violation, and the five-week old downtrend from the 106 high.

The bullish elements of the chart are:

*FDG quickly reclaimed its 50-day after a one-day high volume trip under it, an allowed test according to IBD criteria, and held the 50-day on a subsequent retest yesterday
*The rapid rebound prints as a clear bullish hammer reversal candlestick on a weekly chart, as shown in teh second chart below
*FDG is above its 10-day and 20-day averages
*FDG is moving up within its 10-day bollinger bands (heading to the top band at about 100)
*Yesterday, FDG tested the gap up from 88.5 to 90, and didn't even come close to fill it.
*Money flow is increasing again from lows that never even got very oversold
*this bullishness is taking place just as the teachers are dumping shares again, which creates bearish pressure

The bearish elements of the chart are:

*the volume picture is mixed -- volume on down days has been higher than on up days

Besides the chart, positive fundamental news is supporting the move up -- the favorable resolution of a rail contract dispute. RBC's analyst estimates (higher than other analysts) suggest the rail contract resolution and FDG's pending tax structure change will yield 2005 dividends of $14.50ish (USD) in 2005 and $20.50 in 2006.

On a purely value basis, FDG is a strong buy here - trading at a 20%+ yield on projected 2006 divs and 15%+ on 2005. Even a 12% yield on projected 05 divs will take FDG to 120.

What to expect -- with FDG at the apex of the two trends, you should expect volatility. Longer-term trends usually beat shorter-term ones, but FDG has already shown weakness in the longer-term trend, so I assess the strength of both trends as roughly balanced.

Look for a high volume move down or up. If FDG moves up convincingly tomorrow morning (Wed, 4/6), it will have clearly taken out the downtrend line and will likely hit the bullish PSAR signal now sitting at 97.5. This bullish indicator is moving down and will likely drop close to 96 tomorrow. If FDG rises above tomorrow's PSAR buy signal, then based on past chart action, it will likely run up several percent before falling back to test the breakout area and resuming its run up.

If FDG drops tomorrow, that adds weight to the idea that FDG has failed to hold its long-term uptrend. In that event, it will likely consolidate further before establishing a new trend. Based on the bullish fundamentals and bullish cjart action, I fully expect any consolidation would resolve upwards. I have no doubt that FDG has not yet seen its cycle highs.

So I am buying common and calls on any drop. I am buying the June 105 calls because I think FDG will have clearly broken out by the early June earnings announcement, which follows the shareholder vote on the stock split and tax-beneficial reorganization. I expect FDG to hit 120 on that runup. After 120, I will begin pairing down on margin on any signs of weakness. I plan to continue buying puts in the future when FDG turns down from overbought levels.





4/1/05 -

1. + FDG quickly reclaimed the support line (not to mention the 50-day). Thus both key bullish trend indicators are intact.

2. + The high volume down week prints as a bearish signal because the close was modestly negative but we should regard it bullishly because FDG came up 13 points (15%!) off the Wednesday low to close the week with only a modest loss. This is a bullish hammer candlestick.

3. - FDG remains below the five-week old downtrend resistance line formed from the 106 high.

This suggests to me that the short-term trend is now bullish. That said, there is resistance at the downtrend line and fairly strong resistance from 100-106. Thus, I expect FDG will runup to the downtrend line early next week, then bounce lower (scaring some more longs out of their positions). The bullish accumulation this week suggests FDG will ultimately move higher. Thus, I expect that following volatility next week as FDG approaches the apex of the five-week downtrend and the long-term uptrend, FDG will then break upward to the 100-106 area, consolidate, then eventually blast off to the top of the channel, which by then will be around 115. I expect FDG will reach 120 on that run, maybe by June when the higher divs should be announced.

Who else do you know that lays out these kind of predictions - huh?

In retrospect, we all should have seen the negative breakout early last week from the triangle formation and bought puts. This is much clearer on the weekly than the daily chart. The weekly BB's are very tight, suggesting a strong move from here one way or the other. I have little experience with weekly BB's so it would make sense to play around with the indicator before regarding it too highly.

I am way too long the common and the June calls at 75 and 105 strikes. I will buy puts again when things start looking toppy again.





3/17/05 -

FDG has continued to rally ever since coming close to its uptrend line at 90. I have been surprised that the rally never broke down to retest the low. (I suppose that reflects the bearish and skeptical psychology that has entered my mind from staying in NFI about a year too long.) Anyway, the chart now shows that FDG is clearly rallying, having overtaken short-term resistance at 98.

There is no resistance between here and 106, the early March high and the current channel resistance. This suggests FDG will make it at least to 106 on this leg, if not higher. My favorite secondary indocators, MFI and CMF, both confirm the price trend.

The only downside I see is the low volume on this leg up.

I also illustrated on the chart the best indicators to pick reversals. The support indicators are the 10 20 and 50 day averages, the channel support and the 10-day lower bollinger band.

Today, I gave up on my bearish stance and bought back for a big loss the March 95 covered calls I wrote two days ago for 1.5, sold the rest of the March 100 puts I had bought in the beginning of March for 1.7 (same as I bought them for. I had sold the rest earlier for 300% gains), and even bought a couple deep in the money June calls, 75-strike for 25.2.




3/4/05 -

Today FDG failed to overtake its channel resistance line on high volume. This resulted in a bearish deliberation candlestick pattern because the two strong, high volume up days were followed by a small body candlestick reflecting a failure to hold any of the earlier substantial gains from the opening price. This loss of momentum is also reflected in the declining Chaikin Money Flow, a bearish divergence from the rise in price. Volume, while high, dropped slightly again from the the higher volume of earlier strong up days, which is another signal that momentum may be waning. FDG also flashed another overbought signal, this time with the Money Flow Index reaching into overbought territory. This normally does not immediately lead to a reversal, but is another cautionary sign.

As a result, FDG will likely correct from here. Look for the opening action Monday to confirm today's bearish correction setup. FDG tends to establish a direction within the first hour of trade.

Support is indicated at 78-80 (pivot from long-term breakout), 87-88 (trendline and pivot from minor consolidation), and 92-95 (short term congestion and 10-day moving average).

Given the strength of FDG's rally, the strong fundamentals underlying the runup, and the fact that FDG has "only" advanced 25% from the pivot of a major consolidation at 80, I do not expect FDG's drop will be long-term or excessively deep. My hunch is that a low will occur between 90 and 95. I will buy more calls and common on any drop.

This morning, I sold for 4.9 another slug of March 100 calls that I bought yesterday for 2.9 and later bought March 100 puts for 1.7 to help protect my position from a drop. The calls later crossed at 7+, so I left some serious money on the table. But I had to go to a meeting and could watch the action. I bought the puts because I keep a highly leveraged and concentrated trading portfolio, currently 180% FDG, including margin, and do not want to risk losing the gains I achieve.




3/2/05 - Today FDG ran up strongly to close just above the top of a 6 week channel that had been creating resistance. A positive open 3/3 will send it clearly above the ST channel. The next area of resistance is the top of the 11-month channel running from April 2004. (See long term and short term charts below.) Today's move occured on relatively strong volume and the price action created a bullish engulfing candlestick, the body of which completely swallows the body of yesterday's low volume down candle. This is all bullish.

At the same time, it is usually very difficult for stocks to break above the channel lines formed following long-term consolidations, so I expect FDG will run to 99-100, then drop back, possibly all the way to 88-90. For a possible preview of FDG's price action the next few days, have a look at PCU's runup following the bullish engulfing candlestick it made a few days ago. It shot up 10% at the open the next day and has drifted steadily lower since.

I have not been buying common since the breakout from 85, but have been trading calls around the price action. Today, I bought March 95's for 2 and March 100's for .6. I have limit sells in for these at 4.5 and 2 respectively, which should be achievable on a runup to 99. I will change strategy and sell on any weakness however, because FDG is short-term overextended at this point. My long-term target is still above 120.

Short-term channel (3/2)


Long term channel (3/2)



2/1/05 - Breakout is here - ST target 90+, LT = 137

A decent short term strategy might be to sell Feb 90 covered calls on a long position when the breakout shows its first sign of weakness, which would likely take the PPS down 5 points or so. This would be risky, in the sense that you'd have to nimbly buy back the calls as soon as any breakdown rebounded, otherwise, you'd have to buy back the CC's at a loss if the uptrend quickly re-assert itself, which is likely given the strength of the breakout. But overall, the risk/reward would be favorable, and the nimble could probably make money, especially if the correction didn't occur until closer to the options expiration, Feb 18. If Feb 95's are introduced by then, then selling those would be a no-brainer, IMHO.




1/26/05 -- Trading update: I bought back the covered calls I sold last week for 1.2 and went long Feb 80's today at 1.4, after trying to buy them at the 1.2 ask minutes before (but the ask moved up as soon as I entered the order - hate that, crooks!)

The parabolic runup in FDG in the last fifteen minutes struck me as a trading opportunity. Add the fact that the markets are up a second day in a row, and that others in the steel input sector are rallying to new highs after holding up very well while the market sold off, and I think there's a chance FDG could be above 80 before the end of next week. I will sell the calls tomorrow if the rally peters out at or under the 79.75 high (and may sell covered Feb 80 calls too).

Options calculator says the bid should be 1.6 if FDG moves even 50 cents tomorrow (bid is 1.45 on a 10 cent move), so I can't see how this trade could possibly lose money unless FDG drops at the open, which I doubt.




1/18/05 -- FDG remains in an ascending triangle pattern. I expect it to drop back to the trendline support and possibly the 50-day average before eventually rallying over the current resistance. Today, I sold Feb 80 covered calls for 2.2 while maintaining a limit buy order above 73. I will try to expand the position on any drop.




1/6/05 -- FDG rallied to the old high as I had suggested below, tried to break out a couple times, then failed with a big black marobozu candle (reversal from a breakout), which precipitated the current decline. It's decline appears to be dissipating as it closes in on its support line at 72 and the uptrend since March and the 50-day EMA, both at about 70.

I think FDG is setting up for a retest of 77 and possibly a cup and handle, a breakout from which should generate 50%+ gains. The fundamentals are strong and I think FDG is just caught up in the new year's selloff.

If I were smarter, I would have waited til now to increase my position, but my charts are better than my actual trading sometimes....If FDG broke through its uptrend line and 50-day average at 70, then it would clearly be time to sell and wait for better prices below.



12/20/04 -- This chart shows Fording as its sets up to test its old high, offering an easy trade for a gain of 10%+. The hammer candles as it tested its 50-day average and the corresponding support line all foreshadowed the rebound. (Too bad I've been too tied up in NFI to notice.) The fundamentals on FDG look very strong, with a higher yield than NFI, and better EPS growth, so that's one destination for my money as I pare down the NFI position. FYI, this chart also illustrates the risk in breaching the upper trendline. When such a breach fails, as it did in FDG a few weeks ago, it often leads to a reversal and a test of the lower trendline, in this case a quick 20% drop.