IR (Friday's closing price - 34.81)

IR had a positive earnings report this week that generated a strong rally on Friday. Nonetheless, the stock reached several very important resistance/objective levels with that rally and the action seen when the levels were reached was negative. In the end, the stock showed a reversal pattern on Friday when the stock made new 13-month highs but closed in the red below the previous day's close.

IR shows the 50-month and 200-week MA at 37.10. With the rally up to 37.19 on Friday both of those important lines were reached. It was also evident the selling was strong at those levels as the stock closed in the red, negating all of the early mornings gains as well as the positives of the earnings report.

On a weekly closing basis, resistance is decent between 35.80 and 36.00 and then again between 36.93 and 37.14. On a daily closing basis, resistance is also decent between 35.29 and 35.40. On a weekly closing basis, support is non-existent until decent support is reached at 29.70 (most recent low weekly close as well as 100-week MA). On a daily closing basis, minor support is found at 33.69 and then again at the 50-day MA currently at 31.56. Below that, decent support is found between 29.70 and 30.28. The next support level below that is 28.02 where the 100-day MA is currently located.

The daily and weekly close resistances between 35.60 and 37.14 are all from previous low daily and weekly closes. As such, they are not necessarily considered strong. Nonetheless, having the 50-month and 200-week MA's at the 37.10 level increases the strength exponentially.

With the indexes likely to have reached a top and IR having tripled in price over the past 8 months, it stands to reason that a correction is likely to occur, especially now that the earnings report is out. The closest support level of any consequence is down at the $30 level (previous low close and 100-week MA).

The entry point into the short is difficult. The stock spiked down $2.50 on Friday, making it unlikely that Friday's high at 37.19 will be seen again. Intra-day resistance, based on the 10-minute chart, suggests that the stock will have problems getting above the 35.35-35.46 level.

Sales of IR between 35.32 and 35.46 and using a stop loss at 37.29 and having an objective of 28.02 will offer a 4-1 risk/reward ratio.

My rating on the trade is a 4.25 (on a scale of 1-5 with 5 being the highest probability).

My name is Tony and I am a chartist. I have been trading for close to 30 years. In the 80's I was a broker/trader/analyst for Merrill Lynch, Dean Witter, and Pru-Bache.

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