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Bernie's bets: Trade up & down


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by Bernie Schaeffer, editor Schaeffer's Investment Research

Based on our strategy of assessing technical, fundamental and sentiment-based metrics, I initiated a long position in Expedia (EXPE) and a short position in Potash Corp. of Saskatchewan (POT).

Expedia has shown strong price action lately, gapping up on better than expected earnings at the end of April. The stock is also up 56 percent year-to-date.

On the sentiment front, 9 of the 17 analysts covering EXPE have it rated as a “hold” or worse. This leaves the possibility for future upgrades and could drive the shares higher.


Additionally, short interest is at 27 percent of the stock’s float. This creates the potential for a short-covering rally, which could act as a tailwind and drive the price even higher.

Meanwhile, price action in Potash Corp. of Saskatchewan has been weak, with the equity down 7 percent year-to-date.

POT recently pulled below $40, a level that is half of its previous high. This $40 mark has also been supportive since October of 2011. With the shares now below this important level, it could act as resistance.

POT has also been trading below its 200-day moving average since the middle of September 2011, suggesting that it could be in a long-term downtrend.

Of the analysts covering the stock, 17 of the 24 have it rated as a “buy,” with 12 of those 17 analysts indicating a “strong buy”. Downgrades are a definite possibility, and this could drive the shares down even further.

Learn more about this financial newsletter at Bernie Schaeffer's Investment Research.

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