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Monday, June 1, 2009

June Watch Lists

Ok, so after a disastrous month of May; due mostly to me not following my own game plan; I have come up with a group of stocks for the month of June.

As I went through the list of potential picks, I noticed that stocks were falling into two basic groups.

One: testing support and or resistance levels.
Two: showing signs of common trading patterns.

Support and resistance levels can sometimes be difficult to predict and trade against, especially if no other signaling patterns are present or news of interest are present. And I found this to be frustratingly true in many cases.

In regard to trading patterns; I noticed a couple noteworthy.

Although many stocks showed variations of these, I am only including one stock chart pattern (MVL) because it happens to easily show many classic patterns.

“W” patterns: Are usually reversal patterns and can be set up in a couple different ways. The reversal pattern was set up with a strong downward trend or triangle which bounced off the support level, rose into the first leg to the midpoint of the W pattern; which was followed by the a second bounce off of the support level.

“Pennant and Flag” patterns: The first break out point was the rising pennant / flag pattern which topped about the midpoint of the W pattern. The second breakout point was set up by a more extended rising flag pattern which was set at the previous high starting point of the overall W reversal.

"Cup Handle": There is another pattern which can be seen here, actually twice, and that is a cup and handle. One could argue that the previously mentioned W pattern with the second breakout point is one cup handle. And a much larger one which started at the beginning of the chart and we are now in the “handle” part.

So, what is it going to do next?

I hate these patterns when they set up at or near a 52 week range, which this is close to being.

If you look at the overall pattern since the first breakout, it seems to be following a classic pattern of rising pennants. And some might argue that the current smaller W pattern is nothing more than another "flag" pattern.

I would look for really good strong volume to break past the current W / handle pattern it is currently in.

Once it significantly does this above 33.5/34 range I think it could pop up to the actual 52 week high of 38.50.

So, here are some quick notes I made regarding my other picks.


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