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Play 'Bearish to Bullish Reversals' With Pairs Trades

Monday, 15 Jun 2009 | 5:45 PM ET

Finding it tough to navigate this sideways market? Let Oppenheimer’s Carter Worth lead you through the storm.

As you may know Worth is a market technician who follows patterns in charts. Because he believes stocks are stuck in a range – basically dead -- Worth feels this market is ripe for pairs trades.

In a nutshell he advocates looking at stocks that have been highly correlated over time until lately when they have diverged. The assumption is that they will converge again.

Trade #1: Long Daimler (DAI); Short (F)

  Price   Change %Change
F
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Worth’s thesis: Patterns suggest Daimler's stock looks be in the throws of a bearish to bullish reversal while Ford's stock has recovered too steeply.

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Trade #2: Long (ACN); Short (IBM)

  Price   Change %Change
PRGTX
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  Price   Change %Change
IBM
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Worth’s thesis: Patterns suggest Accenture is in the early stages of a bearish to bullish reversal while IBM's November – June advance has been very steep and 'uncorrected'.

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Trade #3: Long (UBS); Short (CS)

Worth’s thesis: UBS's bearish to bullish reversal appears well-defined while credit Suisse has “shot the moon.”

Trading 'Pairs'
How to 'pair trade' now, with Carter Worth, Oppenheimer Asset Management and the Fast Money team.

So when should you take profits? “If you can get 5%-6%, walk away,” Worth says.

To see Worth's complete analysis please watch the video.



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Trader disclosure: On June 15th, 2009, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami Owns (AGU), (C), (GS), (INTC), (BTU), (MSFT), (NUE); Seymour Owns (AA), (BAC), (BX), (EEM), (FXI), (TTM); Seymour's Firm Owns (NOK); Seymour's Firm Owns (TKC); Najarian Owns (BX) Call Spread; Najarian Owns (FCX) Calls & Put Spread; Najarian Owns (GE) Calls; Najarian Owns (INTC) Call Spread; Najarian Owns (MOS) Put Spread; Najarian Owns (PALM) Calls; Najarian Owns (WNR); Najarian Owns (S) Calls; Terranova Owns (TER), (SDS), (ABT); Terranova Owns (RIMM) & Short (RIMM) Calls; Terranova Is Short (RIG); Terranova Owns (BRCM) & Short (BRCM) Calls; Terranova Owns (MS) & Short (MS) Calls; Terranova Is Short (FCX); Terranova Owns (GENZ) & Short (GENZ) Calls; Terranova Owns (HES) & Short (HES) Calls; Terranova Is Short (XOM) Call Spread; Terranova Owns (DIS) Call Spread; Terranova Owns (X) & Short (X) Calls; Terranova Owns (JPM) & Short (JPM) Calls; Terranova Owns (BTU) & Short (BTU) Calls; Terranova Is Short August Gold Futures; Terranova Owns (POT) & Short (POT) Calls; Terranova Is Short Septmeber Oil Futures; Terranova Owns December Oil Futures; Terranova Owns August Nat Gas Futures; Terranova Owns (IBM) & Short (IBM) Calls; Terranova Is Short (OIH) & (OIH) Calls

Patricia Edwards Owns Wal-Mart (WMT) and Costco (COST)

  Price   Change %Change
UBSN
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IBM
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ACN
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DAI
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