At All About Trends, the action in leading stocks — stocks that have delivered solid returns during this rally — is what we use to gauge the health of the market. That’s because in order for the market to continue to advance, the leaders must lead the market higher. And lately, those stocks have struggled — just look at AMZN, SNDA, NFLX, BWLD, JOSB.

That said, it’s not surprising to us to see what’s happening in the NASDAQ. And since the NASDAQ often leads the market, we expect to see topping patterns in the Dow and S&P very soon.

As you can see above, the NASDAQ has formed a Change In Trend pattern — from up to down.

Typically, there are three short sell set-ups that provide the best opportunity for low-risk gains. They are:

• Double Tops
• 1st Thrust Down
• Pullback Off Low’s

The above chart of the NASDAQ sports all three. The first clue that a change in trend is near is the formation of a double top (the red lines). Then, we have the first thrust down, which you can see from the second top down to the start of the pink line — the stocks that have led the NASDAQ higher are also now showing a first thrust down which explains the selling in AMZN, SNDA, NFLX, BWLD, JOSB.

And finally, you have a Pullback Off Lows pattern (the pink line). When a stock or an index completes its First Thrust Down, it will eventually find support and attempt to rally. This rally attempt is called the Pullback Off Lows pattern.

All of these set-ups are tradable on the short side.

Let’s start with SNDA first.  SNDA formed a solid Double Top pattern. This is what it looked like before it triggered a short-sell trade:

When it broke its pink uptrend line, it began its First Thrust Down.

JOSB is another example of a stock that is in the First Thrust Down phase.

As you can see, JOSB formed a double top as shown by the red line. The blue box is the first thrust down which is often a steep, quick sell-off — in this case JOSB has lost 14% in just two days.

These First Thrust Down moves start when a stock tops and then breaks its upward trendline. The place to take the trade is at the trend line break.

Finally, after a stock completes its First Thrust Down, it will eventually attempt to rally back. When they do that, they will form the third short-sell pattern we look for called the Pullback Off Lows pattern. LOPE (NASDAQ:LOPE) formed this pattern back in March and here’s what it looked like as it triggered:

This pattern is the exact opposite of the Pullback Off Highs pattern we’ve discussed in the recent past. It’s also usually the start of many trades we can do on the same stock. As you can see here, when a stock reverses course and starts making lower highs and lower lows, each rally attempt is a new short-sell opportunity.

Sincerely,
David Grandey

Source: Three Ways to Short Stocks

Good Food, Plenty of Beer AND Profits?

At a time when most consumers are pinching pennies by forgoing dinners out, there are still some restaurant chains that are doing something right.

Put Buffalo Wild Wings (Nasdaq: BWLD) at the top of that list. Beating Wall Street’s expectations caused the stock to shoot up close to 35% yesterday.

Despite a failing economy – and the rising price of chicken wings – this restaurant has obviously been well received by hungry patrons.

Based in Minneapolis, Buffalo Wild Wings specializes in chicken and beer, a favorite combination among many Americans. Throw in a ton of jumbo TVs (usually tuned to a big-time sporting event) and you have the perfect all-American atmosphere.

That’s likely what led to the earnings surprise. Its fourth-quarter earnings beat analysts’ profit estimates by four cents per share.

Net income increased 28.7% to $7.7 million, or 43 cents per share. Total revenue increased 32.6% to $121.2 million. Same-restaurant sales (the key metric for gauging restaurant health) jumped 4.5% at company-owned stores and 2.5% at franchise restaurants.

The best news by far, and what’s really riled up the analysts, is that the company also announced that it expects to meet its goals of 15% unit growth, 25% revenue growth, and 20% to 25% net earnings growth in 2009.

Are you kidding me? In this market?

Throw in their nonexistent debt and plenty of cash on hand, and you can see why the CEO is optimistic…

CEO, Sally Smith, accredits much of its increasing numbers to highly disciplined management and constant customer feedback. She says the company will rely on much of the same in the coming quarters.

“We realize these are challenging economic times. Changes in commodity prices and tightening of credit markets are just a few of the many variables that are present in our business.”

The above-mentioned variables haven’t been a problem (so far).

Taking Wednesday’s surge into account, along with its impressive growth and yearly earnings increase – and don’t forget it’s affordable prices and delicious food – Buffalo Wild Wings is a stock worthy of anyone’s Watch List.

Source: Buffalo Wild Wings (Nasdaq: BWLD): Stock of the Day

Adam Lass in Taipan Daily says one stock worth a look right now is Buffalo Wild Wings (NASDAQ:BWLD). He has examined its chart and says this stock could gain as much as 35% over the next few weeks.

That’s because America’s wealthy “are dummying up, pulling in their horns and battening down the hatches.” And this is good news for restaurants such Buffalo Wild Wings, whose customer base is swelling as the rich go downmarket. More from Adam…

Last I checked, my friend Joe hated chicken wings.

Joe grew up poor in America’s rural south. Not dirt-poor or anything like that. More like working poor. In fact, just about everyone in his family worked at least one job, if not two.

His mom used to buy wings by the 100-pack from the local market, and serve them up deep-fried with hot sauce and homemade cabbage and carrot coleslaw to a horde of siblings, friends and any miscellaneous neighborhood kids who were hanging around.

At the time, he thought it was the bee’s knees, but when you eat anything night after night after night, eventually, you can go sour on it. By the time he was a full-fledged adult, able to choose what he did and did not have for dinner, Joe swore that chicken wings would never grace his table again.

I checked in with Joe recently after not hearing from him for some time. I was going to be in his neck of the woods for a meeting, and suggested we get together and catch up a bit. When I asked where we might meet, he suggested (much to my surprise) a place called “Buffalo Wild Wings.”

On my way to the restaurant, I passed several other well-known chain “eateries.” I’m sure you’ve regretted eating and drinking in most of them at one time or another. Hey, that’s why they invented Tums, right?

Despite this being a warm Friday evening in a solid middle-class suburban neighborhood just outside a supposedly well-to-do American city, most of the lots were only half full, and two buildings were boarded up entirely.

But the cheap wings joint was parked up tight, with whole families congregating in the heat out front waiting for tables.

Fortunately, Joe already had a table staked out for us, replete with two cold mugs of beer and an enormous bowl of hot wings. After we got the usual hello-how-are-yas and backslapping out of the way, I figured I just had to ask: “Joe, are doing okay? I thought you swore off wings forever.”

“Oh I eat here all the time now. Things are fine. Well, fine as they can be, considering. Some of the other outfits in town are going out of business, and even a few of my clients had to bail on projects.

“Oh and one *$&%*$^@# stiffed me for the final payment. We’re in small claims court over that, but he’s gone belly up, and I doubt I’ll see a nickel anytime soon.

“I’ve laid a couple of guys off, but they were slackers anyway. Used to show up hung over when they showed up at all. You know — Monday morning flu and what not.

“But seriously, it’s the costs that get to ya: gas for the trucks, materials for the jobs, electric, groceries and what not. Sometimes it’s enough to make ya cross-eyed.”

Now don’t let the way Joe talks fool you. He shows up at six in the morning on every job he takes, and runs his crews like a martinet. But it’s been a long time since he got his own hands but so dirty, and I believe he brings in six figures pretty reliably, and seven in a good year.

And I’ve never met a man with a better head for figures. Had Joe the luxury of attending a prestigious college like Yale or Harvard, he might just be one of those professorial types warning us all about just how bad things have gotten — and how much worse they are likely to get.

Instead, as Joe likes to put it, he’s a guy who “has enough sense to get off the tracks when there’s a freight train headed his way.” So Joe already knew what the Institute for Supply Management just announced: that rising prices are shrinking the once mighty U.S. service sector.

Joe could have told you a month ago what Goldman Sachs’ Adrianne Shapira just got around to mentioning: “We expected that as the checks fade, so would (chain store) sales. Consumers are filling their SUVs, their home equity values are plummeting, and they are feeling a lot of pressures.”

Joe may not know for a personal fact that national gains in worker productivity are slowly grinding to halt. It takes some bright guys at the Department of Labor to figure out that the amount a U.S. employee produces for every hour on the job grew 0.55% in the second quarter of 2008.

But he can tell you that he — like so many other bosses — will pay fewer workers less cash in 2008. And even with this “leaner, meaner” workforce, he will still come up short profit-wise.

And Joe can quote chapter and verse as to how his clientele — wealthy folks one and all — are coming up shy for the first time in decades. How they don’t want to write checks right now because they are hustling around all day making sure that none of their brokerage accounts are about to get swallowed up and damn sure that none of their bank accounts are over the FDIC limit.

But you want to know what’s got Joe really nervous? It’s the fact that those wealthy folks, the top 10-percenters who contribute some 70% to our national gross domestic product, are dummying up, pulling in their horns and battening down the hatches.

He didn’t need to wait for Unity Marketing’s poll that shows that these “rainmakers” spent 20% less on luxury goods in the second quarter. He sees them all the time now… at the next table over at the cheap wings joint.

So here are two take-aways from my dinner with Joe: First up, you might care to look into Buffalo Wild Wings stock I’ve examined their chart, and this sudden swelling of their customer base as the rich go downmarket could push them up 20% over the next few weeks. Maybe even 35% if they get rolling.

And I’ll tell you right now that I also sent their chart to my partner Bryan Bottarelli this morning… and we are looking at call options that stand to gain 110% off that move.

The other bit of advice is considerably more grim: When the ultra rich are worried about their brokers and their bankers, (and trust me, the few that tell you they aren’t are fibbing to you), then us merely wealthy types need to keep on shorting those financial stocks, ‘cause we’re going to need the cash.