Boston Scientific Stock (NYSE: BSX) Nearing “Plunge”

Stocks closed higher today, shaking off poor unemployment data and a pessimistic outlook from the Fed. The Dow (+0.10%) and S&P (+0.20%) rose slightly while the Nasdaq Composite (+1.30%) jumped for a solid gain.

The Labor Department almost spoiled things this morning, though, when it reported the latest weekly jobless claims. For the week ending August 15th, 1.106 million Americans filed for first-time unemployment claims. Economists only expected 923,00 fillings by comparison.

It also marks an increase from the week prior, where unemployment claims dipped below 1 million for the first time since March.

The increase in jobless claims comes at a bad time as additional unemployment relief expires. Lawmakers are struggling to pass a new unemployment bill as well, applying even more pressure to the U.S. economy.

“We can’t even be sure this recovery is sustainable as the economy got a huge boost from consumers’ wallets lined with $500 billion of stimulus from Washington from those $1,200 and $600 checks,” Chris Rupkey, chief financial economist at MUFG, said.

“That money is gone and with it the prospects for a lasting economic recovery where everyone on Main Street benefits. At the moment only stock market investors are riding high as the Federal Reserve’s money printing benefits Wall Street more than Main Street.”

Rupkey continued, adding:

“Net, net, new jobless filings are rising again which means the economy isn’t out of the woods yet with many businesses across the country still in full or partial shut down and unable to pay all their employees or make the mortgage rent and keep the lights on. The stock market rally on confidence the worst of the recession is behind us may be premature.”

Rupkey’s right, and what’s more, he’s completely accurate in his assessment of the current economic situation.

Still, equities press ever higher. The S&P’s now within striking distance of setting another new-all time high. The Dow managed to close above its June high today and the Nasdaq Composite is erupting once again.

That doesn’t mean the rally will continue, though. With so many stocks forming reversal indicators, it’s likely only a matter of time before a sell-off occurs.

And for one stock in particular, it could happen sooner rather than later.

Boston Scientific Corp. (NYSE: BSX) jumped above its June high in late July. Then, last week, it made another run at that high but ultimately fell short at the upper Bollinger Band (BB).

Now, the stock’s slowly falling. That descent could hasten over the coming weeks now that BSX has broken beneath both the 10-day moving average and its minor bullish trend (represented by the yellow trendline).

Even better, BSX just completed a double top reversal formation.

Should BSX trade below today’s low, it might make sense to take the stock short with a trade trigger of $38.62.

From there, BSX could very well fall to the June low, where it could potentially turn around and go on another rally.

And even if BSX doesn’t drop that far, it could still produce a tidy profit for bears if it lands in the $36.00 range, or roughly halfway down to the June low.


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