2 Small-Cap Breakout Candidates
Two smaller companies also might be a source of opportunity in the month ahead: Brookdale Senior Living (BKD) and Abermarle (ALB). Neither operates in a particularly exciting industry (assisted living and chemicals, respectively), but their lower trading volume might signal above-average upside if these stocks break out.
4 Potentially Vulnerable Stocks
The four weaker-looking charts belong on traders’ watch lists, but they aren’t necessarily names where you should jump in from the short side just yet. In a market as strong as this one, it pays to let shakier charts play themselves out rather than trying to anticipate a move.
Having said that, eBay (EBAY), Toll Brothers (TOL), and JB Hunt Transportation (JBHT) are all trading very close to key support levels and are struggling to hold above their 200-day moving averages. If the market tires out in the coming weeks, these stocks could prove to be a source of beta on the downside.
Finally, gold stocks — after teasing investors with a late-October rally — have once again proven unable to produce sustained upside. Now, the Market Vectors Gold Miners ETF (GDX) has traded back near its 52-week low. This bears watching, since the inability to hold established lows has led to meaningful additional downside throughout this bear market (as depicted by the horizontal arrows in the chart below). GDX still has some leeway here, with the ETF closing Friday at $24.13 with a 52-week low at $22.21). Still, this low provides a clear reference point where longs should consider cutting their losses.
By the same token, GDX also has a history of delivering big short-term returns when it does bounce off of support (shown by the vertical arrows below). This indicates that gold stocks are at a level where the odds of elevated volatility — in either direction — are rising.
Traders, take note.
As of this writing, Daniel Putnam did not hold a position in any of the aforementioned securities.