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Gator's Chart of the Day: NUAN

Nuance Communications Inc is rumored to provide the recognition system behind Apple's Siri.  While this is high profile it is a very small part of NUAN's business.  Every product they offer is based on their speach recognition capability.  It is integrated with other applications to automate a wide variety of medical data input and voice to text services. 

The company reported earnings before market on 8/7.  The stock gapped up and then sold off for the rest of the day and closed down nearly 3%.  Since then it has completed a "W" pattern and kissed the 200 day simple moving average from beneath.  This average has proven to be stiff resistance.  If the stock can trade through and close above it $30 becomes a likely target.

The Trades
Depending on your opinion of the market and the company's products there are two trade opportunities ... something for everyone.  The 200 day sma is the key to both trades.

The Long Trade:  When the stock trades above the 200 day sma take a small position (1/4-1/3 of your desired full size) and put your stop around 23.85 (below 24.)  If the stock is still above the 200 going into the close and volume is strong then consider adding.  If not then wait for a close above the 200 day before buying anymore stock.  I would want to have a full position when the stock clears 24.75 and expect resistance around 26.50-27.  Once 27 is cleared 30 is the logical target.

The Short Trade:  If the stock fails to clear the 200 day on the next attempt short it (or buy puts) and put your buy stop just above the 200 day.  As long as the 200 continues lower hold the position.  Expect support at the 50 day but the stock could retrace down to 20 (or a little below) as it tests the double bottom.