Same story, different week. Ever since the $SPX kissed the underside of its broken trendline and started to fall three weeks ago, we have been in “shopping” mode; trying not so much to find tradable setups, but looking for stocks with good relative strength to put on our list for when the market turns.
This should be an interesting week as we are right at the 200ma where we would like to see a solid bounce. If we get that it might be the first step in ending this recent sell off, however the signs don’t seem that positive as sectors that looked like they might be leading us out of this drop (financials and home builders for example) are starting to be suspect. This chart in $SKF is particularly unsettling for the financials.
After being in a down channel for six months, $SKF put in a double bottom and broke out of that channel. If it brakes resistance at around $39.50, that would not be a good thing.
But let’s look at some stocks that are still holding up well, ones we want to have on our short (meaning long) list.
Sure, I just said the movement in $SKF could be a bad sign for financials, and $BAC had a false breakout last week, but it’s still within it’s consolidation pattern. As long as it holds the bottom trendline it’s still one to keep watch on.
It’s never particularly reassuring when you have a small cap biotech company pop up on your radar, but this pattern in $DYAX looks pretty good. If nothing else it sets up a good risk/reward ratio trade and an objective stop level if you buy the breakout.
Companies like $FDX are often barometers for the economy going forward, and just like the $SPX, it’s at an inflection point here. The stock broke a downtrend line and has twice come back to “kiss” that trendline. If it holds here and can rally, it may be a good play as well as a good macro sign.
A nice move off the 200ma area and a small little bull flag is showing that $IDCC has good relative strength and should be watched.
This chart is showing an incredibly tight range on a closing basis for the last seven trading days in $NFLX. This tight consolidation after a nice “pop” usually indicates that the stock is setting up to go higher.
If not for the overall crappy market environment I would be salivating all over $NTE. A strong break out of a pennant formation, and a tight little flag is showing some impressive relative strength.
$PATK had a clean break into 5-year highs at the end of September and has been able to base sideways since. If the market (and economy) get going again, this should be a big winner.
Again, breaking into multi-year highs and then basing is good. $REED is setting up a breakout trade with a well-defined stop and a good risk/reward.
$STMP is old school, IPO’ing right at the height of the internet bubble. It’s never quite made it back to its glory days, but this recent breakout and flag is pretty impressive given the recent market action.
I cried the day I had to give my $TIVO DVR up because my new cable company didn’t support it. I assumed that was the beginning of the end for the company. But somehow they have managed to survive. I can’t put my finger on it exactly, but I like the look of the chart right now and would buy it above the small downtrend line.
Brilliant stuff like this rains down like..well, rain, on my stream during the week. If you want to get wet, follow me on Twitter and StockTwits. You can also pick up my book Trading - The Best of the Best: Top Trading Tips For Our Times by clicking here.