Bringing Some JOY to Your Trading

Trade of the Day

Long

Joy Global Inc (JOY)

Wednesday, July 9, 2014

Company Symbol Industry Rating Potential Trade Gain Target Stop Joy Global Inc JOY Construction Machinery & Heavy Trucks 8.3 +5.96% $64.00 $60.08

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The Trade:

This afternoon, Joy Global Inc (JOY) presents a great swing-trading opportunity to the long side. The Construction Machinery & Heavy Trucks constituent has developed a nice flag pattern through the month of June, and looks poised for a run higher from current prices.

JOY has been engaged in a solid, if somewhat choppy up-trending channel dating back to June of 2013. While the stock is not explosive by any means, its intermediate-term trend is clearly positive, and it has considerable longer-term upside from a weekly perspective.

This year, JOY has been through a few significant consolidation periods. This makes the stock a relatively safer play as there is no momentum trade or overzealous algorithmic trading activity at work (see: selloff in SOCL this week... again...), which is nice given the up-tick in volatility this week.

The biggest draw to JOY this afternoon is the clear flag pattern that has been developing throughout the month of June and into early July. Following a positive Q2 earnings announcement on June 5th, which saw the stock jump from $58 to nearly $62, Bank of America followed through on June 6th with an upgrade to "buy" (target $70), sending JOY even higher over the next two sessions.

This explosive string of sessions created the flag pole of the pattern. Once the dust had settled, JOY pulled back and consolidated the move on very little news, showing that traders were willing to test and confirm prices in the low- to mid-$60's. The bottom of the flag formation is just above $60, which is also conveniently at the 50-day moving average.

At current prices ($60.40), JOY is at a relatively favorable entry point towards the bottom of the formation. This presents us with a high upside / low downside trade set-up, as the next stop higher is a ways away and the stop here is particularly tight if JOY is going to hold the flag formation.

Looking at the chart, $64 looks like a good target area for JOY to revisit should the flag formation pan out the way we're hoping. From current prices, this would net a gain of +5.96%. The downside risk here is only -0.52% with a stop at $60.08. Thus, the reward to risk ratio of this trade set-up is very high.

Entry Method:

Buy at the current price (~$60.40).

Exit Method:

Sell at a close below $60.08 (Breakdown) / An intraday price of $64.00 or above (Profit-Taking)

Company Profile:

Joy Global Inc. is a manufacturer and servicer of high productivity mining equipment for the extraction of coal and other minerals and ores. The Company's equipment is used in mining regions throughout the world to mine coal, copper, iron ore, oil sands, and other minerals. The Company's underground mining machinery segment (Joy Mining Machinery) is a manufacturer of underground mining equipment for the extraction of coal and other bedded minerals and offers service locations near mining regions worldwide. The Company's surface mining equipment segment (P&H Mining Equipment) is a producer of surface mining equipment for the extraction of ores and minerals and provides operational support for many types of equipment used in surface mining. In June 2014, the Company purchased certain assets of Mining Technologies International Inc.

Stock Rating:

The Stock Rating indicates the combined score of our proprietary Earning Strength and Company Performance models. The rating scale is 0 - 10 with 10 being the highest.

Disclosure:

At the time of publication the editor and affiliated companies own the following positions: None

Note: Positions may be bought or sold while this publication is in circulation without notice.

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