The Trader’s Guide to Technical Analysis
- From mid-January until late February, stocks traded within the narrow range, but March blew in the winds of change with an early low-volume breakout that evolved into an almost straight-line run and a successful attack on January’s highs.
The Dow Jones Industrial Average (DJI) has risen for four consecutive weeks — the longest winning streak since August 2009 — and is up 4% for the year, while the S&P 500 (SPX) is up 4.6% and the Nasdaq (NASD) is up 5.6%.
But our internal and sentiment indicators are excessively overbought, so the probability of a mild correction early in April is high, although it is likely to be a minor 3% to 5% one. However, the bull market is intact, so investors should focus on the following stocks to buy.
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Top Stock #1: Coach (COH)
The Trader’s Guide to Technical Analysis
Coach (COH), a large-cap designer and international marketer of fine accessories and gifts, has been lagging behind the retail sector.
But last week, COH came to life and broke from a triple-top on very high volume. The breakout followed a consolidation that began in December, with the 50-day moving average as its center of support, and occurred after our proprietary indicator, the Collins-Bollinger Reversal (CBR), flashed a buy signal on March 22.
Our trading objective is $46, but longer term, could be higher. S&P rates COH a “five-star strong buy.”
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Top Stock #2: Health Management Associates Inc. (HMA)
The Trader’s Guide to Technical Analysis
Health Management Associates Inc. (HMA) owns and operates general acute-care hospitals in the southeastern United States.
The stock bottomed in November 2008 at under $1. In May 2009, it executed a strong gold cross and rose from $5 to its high in October at over $8. Upside volume has been accumulating since early January. Last week, HMA broke from a triple-top on very high volume.
The chart objective is $11. S&P has a 12-month target of $10 and rates the stock a “four-star buy.”
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Top Stock #3: Newmont Mining Corp. (NEM)
The Trader’s Guide to Technical Analysis
Newmont Mining Corp. (NEM), one of the world’s largest gold producers, bounced from its bullish support line in January, confirming the significance of the major channel that began in late 2008. The channel has support at just under $45 and resistance at just over $55.
S&P rates the stock a “four-star buy” with a 12-month price objective of $61. The trading target for NEM is $56.
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Top Stock #4: Solutia Inc. (SOA)
The Trader’s Guide to Technical Analysis
Solutia Inc. (SOA) manufactures and markets chemical and engineered materials used in consumer and industrial applications.
SOA has been in a bull market since April 2009, when it broke from a sharp “V” bottom at under $2. From September until February, the stock consolidated within a cup-and-handle before finally breaking out at $14. Last week, SOA issued a strong CBR buy signal, as well as a favorable signal from the stochastic.
The trading objective for the breakout is $18, but longer term the stock could go much higher. Ford Equity Research has a “strong buy” on SOA.
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Top Stock #5: ProShares Ultra Gold (UGL)
The Trader’s Guide to Technical Analysis
ProShares Ultra Gold (UGL) is a double-leveraged ETF that seeks to replicate, net of expenses, twice the performance of gold bullion as measured by the U.S. dollar p.m. fixing price for delivery in London.
UGL has been consolidating above its 200-day moving average with most trading occurring close to the 20- and 50-day moving averages. Last week UGL reversed up off of its major support line at just under $44, which triggered a buy from the stochastic.
This ETF will have to break through resistance at $48 to gain support, but with world tensions and an investor flight to gold possible, UGL could provide the ticket for a highly leveraged trade with a target of $50-plus.
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Top Stock #6: Yahoo (YHOO)
The Trader’s Guide to Technical Analysis
Yahoo (YHOO) has been trading within a very narrow zone since early 2009, but accumulation has increased recently, and the stock is holding above the three major moving averages. In addition, the stochastic has given a buy signal.
With such high accumulation, the chances are strong that YHOO will break through the resistance line at $17 soon. If it does, the trading target for the stock is $20 to $23, but the long-term objective is much higher at $28 to $30. S&P rates the stock a “five-star strong buy” with a 12-month price target of $22.
Related Articles:
- 5 Ways to Tell a Stock is Headed Up
- How to Stay One Step Ahead of a Major Reversal
- 7 Ways to Tell a Stock is Headed Down
The Trader’s Guide to Technical Analysis
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