In our Pre-Market Pulse of this morning we discussed Alexion Pharmaceuticals (ALXN) as prime short-sale target based on its "classic" head and shoulders short-sale set-up. This morning the stock rallied into an optimal shorting area within 2% of its 50-day moving average. As of this writing the stock is trading down 1.53% as the 90.08 low of December 7th and the 86.20 low of November 8th come into play as downside targets. As we figure it, the neckline on ALXN's H&S formation is down around the 82 price level, so an undercut of the 86.20 low could coincide with a bounce off the 82-83 level, roughly around the neckline. The situation remains fluid, and there is always the possibility of being stopped out if the stock rallies beyond the 50-day moving average, but so far it has followed the 50-day line downward.
Apple (AAPL) appears more willing to test its own neckline under the 500 price level than stage any kind of rally that would form more right shoulders in its formation. If our thesis that AAPL will push towards the 500 price level is correct, then the stock should not get back above today's high at 513.97, and we would recommend using that as a near stop for those running a big, concentrated short position in AAPL, with the 10-day line at 520.13 as a maximum trailing stop.
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