EME

[AussieTrader]

Profile:

EMCOR Group, Inc. (EMCOR) operates as an electrical and mechanical construction and facilities services firm in the United States, Canada, the United Kingdom and worldwide. It specializes in providing construction services relating to electrical and mechanical systems in facilities of all types and in providing services for the operation, maintenance and management of all aspects of such facilities. EMCOR designs, integrates, installs, operates and maintains various electrical and mechanical systems; premises electrical and lighting systems; low-voltage systems, such as fire alarm, security and process control systems; voice and data communications systems; roadway and transit lighting, and fiber optic lines; heating, ventilation, air conditioning (HVAC), refrigeration and clean-room process ventilation systems; fire protection systems; plumbing, process and high-purity piping systems; water and wastewater treatment systems, and central plant heating and cooling systems

Trading Idea:

EME is a fundamentally strong company, they have been trading in a loose ascending channel, took a correction with the market and broke out of previous resistance following good earnings and guidance.
They beat expectations and raised future guidance. They reported second quarter earnings of 9 cents a share. Net income rose 68.1% to $44 million, or 65 cents per share. Revenue was $1.72 billion up from $1.37 billion a year ago. They also saw a record contract backlog by the end of the second quarter at $4.67 billion.
Guidance wise, the company said it expects to generate revenues for 2008 in the range of $6.8 billion to $7.0 billion. Earnings per share should be in the range of $2.32 to $2.47.

Technical:

We have an upwards trading channel that started in Jan 2008 encountering historical resistance both descending and horizontal around $30. Following the earns report big volume blew that resistance out. Now the chart is consolidating in a nice bull flag, just above resistance at $30. This pattern allows us a good entry for potential continuation with a definitive area for the pattern failing and hence stop placement. The channel and flag give us a view on short term profit target also. In essence we have a good risk to reward set-up, strong fundamentals combined with nice technicals.

Exaxt Stop and Target will be introduced at the next updates

Trade Plan:

BUY EME at or around the open

[AussieTrader]

Update:

We bought EME whilst technically it was still 'in the identified Bull Flag.' I did this because the prior resistance which was broken and now becomes support is so close by the risk of entry before the flasg resolved to the upside was worth it.

Now we watch for the pattern to play out. I am expecting this to the upside, failure will be breaking (and closing below) the $29 zone. Now due to the closeness of this support a hard stop is not sensible, i will take an end of day approach and decide action if / when the pattern looks broken.

Trade Plan:

HOLD EME

[AussieTrader]

Update:

EME is attempting to'resolve to the upside' so all we can do is try and let that happen. Technically I will be looking for it to trade upwards using the lower channle line like a guiderail of support. Don't expect dynamic price action, this 'should be' more solid and conservative in movement. There is nothing new to add from a fundamental perspective except a contract win they announced last week, but that was just small fry and not any catalyst for change.

No change to the trade plan, still using that $29 zone as indicator for failure.

Trade Plan:
HOLD EME

[AussieTrader]

Update:

Nice volume backed movement today yesterday for EME, nothing fundamental new wise except a contract win for one of their divisions.

The reasoning for entry was based on the bull flag continuation pattern and trading channel which allowed for a safe entry with a target in view. Today due to the strong technical shape in place I will introduce an exit target. The target is to sell if it trades at or above $34.70 (signified by the red line) being resistance near the top of the channel and highs from Oct '07. I won't put a hard stop in just yet, but the ascending lower channel line gives you a clue as to where I am watching.

Trade Plan:

HOLD EME. Take profit if it trades at or above $34.70

[AussieTrader]

Update:

EME setting up a nice bullish consolidation pattern which should resolve upwards soon to our target price.

Trade Plan:

HOLD EME Take profit if it trades at $34.70 or above

[AussieTrader]

Update:

SOLD EME at the target price $34.70

Technically EME did everything we asked of it, trading perfectly along the lower channel line, controlled consolidation and breakout.

I'll put EME on watch and look for a possible re-entry if it looks like it will set-up again.