If you’ve been following my Trader’s Corner over the last while, you’re likely mildly excited as we hit our target on our first trading idea, (NASDAQ: AGIX), then were stopped out on our chicken farms trade, (NASDAQ: SAFM), (which I still believe to be a good long-term investment idea) and are doing just fine on our (NASDAQ: MAIL) trade, up roughly 10% to date on that stock. We’ll consider ourselves batting .500 to this point in the win loss column, since MAIL is still an open trade for all practical purposes. How humble of me.

If you’re concerned about the exact percentage of return we’ve generated since first publishing this column, then you should have been keeping track. Seriously though, depending on your entry/exit levels, you’re returns may have been slightly different than mine. Here’s a quick rough overview of our recent Trader’s Corner trades before we move on to our next idea: up over 20% on AGIX, down 7% on the chicken farms and up roughly 10% on MAIL. So far so good, we’ll take it. Still better than the recent run the broader markets have staged over the last few months. Enough history, onward and upward…

I’m actually fairly enthused about today’s trading idea, as I’ve exercised a bit of patience since first identifying this swing opportunity. Level 3 Communications, (NASDAQ: LVLT), made a nice short-term breakout move in mid October, only to find itself pulling back once the exuberance settled. Currently trading at $5.50 as I type, LVLT has retraced to the 3x3 DMA and appears ripe to continue its recently impressive uptrend.

I’ve included two charts here to state my bullish case for LVLT. First, I want you to see the weekly chart for one single reason…sure the MACD is in positive territory and recent volume has been fairly substantial, but more importantly in my opinion, after a pretty decent ’05 run, LVLT started to show signs of weakness in early May of this year. The stock broke down and appeared as though the recent run it had experienced was simply a seller’s relief rally, however, after hitting a low of $3 and change in mid August, the stock gathered steam and has since taken out a new 52 week high. A clear reversal of direction I hope to capitalize on over the next several months.

Shown in this daily chart, I’ve included two key Fibonacci retracement levels, a 3/8 and a 5/8 retracement levels drawn from two key fib nodes. This confluence area (circled) is going to serve as my stop loss. I’ll set my stop just behind here at $4.90. If the stock gets pushed around before heading higher, I believe this confluence area should support it. If it doesn’t, then I’ll take my lumps, close out my position and chalk it up as a losing trade.

The daily chart I’ve displayed reveals a couple of key points to me. First, the stochastics is basically signaling sell for those of you who like to anticipate these indicators, however, the MACD remains positive and I like that. A perfect head fake in the making. At least I hope so! With the recent pullback to the 3x3, I think the risk/reward of entering my trade at this level is much better than buying the exuberance everyone displayed following the October 17th breakout.

I’ll enter here, with my target set at the 2004 high of $7 and change, which is also a logical profit objective using my favorite Fibonacci expansion levels.

It may be of interest to some readers that LVLT is well off its historical highs of over $100 a share, which it managed to achieve back in the bubble days. Those were the days…

Hope you didn’t own it at that level.

Happy Trading…

Trader’s Corner Editor