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Monday, March 15, 2010

Triangles and W's

This months watch lists have posted some classic ascending Triangle and "w" patterns with good results.

An ascending triangle pattern is characterized as a resting phase for the stock.

A trend line can be drawn connecting multiple or flat highs during this time, which should be horizontal to indicate some resistance above current prices. A second trend line is an ascending or rising trend line which connects multiple higher lows during this period, completing the ascending triangle pattern.

A breakout should occur about 2/3 of the way into the triangle, and happens when the overhead resistance is penetrated to the upside and buyers rush in to accumulate shares.


A "w" pattern is often known as a "double bottom" pattern. Here the pattern shows like a W with the middle part significantly lower that the beginning drop and ending rise before a brief holding pattern.

So how have my March watch list done?

The starting lineup is up 8%
The bench is up 5%

Here are the summaries:

STARTING LINEUP

EXPW – has maintained its strong climb and with the economy (though getting better) still putting the pinch on finances and jobs, pawn shops will continue to see good business.

GHM – had shown slow but steady rise in price and strength since falling off of yearly high points. An announcement of large contract orders sent the stock price back up towards the previous high price points and top resistance. It will be interesting to see what sort of pattern takes hold from here on out.

AAPL – When Apple hit the 210 mark at the beginning of the month there were plenty of folks saying that the stock was in a level trading pattern (with lateral swings in price between 10 and 20 points) and was due to dip back down 10 -20 points. I saw another example of a “W” pattern taking place similar to the stock points last June – July and as early as last December where the stock showed enough strength to break upwards. With the anticipation of the iPad I figured there might be potential for some “hype”. I’m not saying I was right, but… They were wrong.

AFAM – is still showing the potential for an upward break if it can maintain the second half of this current “W” pattern. Of course this is a big if but it deserves watching closely.

CAH – Has shown progressively higher “low” points and seems to be wanting to level off a bit. With all the buzz about health care going on, it will be interesting to see how this and AFAM react if a bill is approved.

FDO – This stock I held on to from last month and my patience paid off with a good quarterly report which sent the stock up earlier this month. I then sold for a 12.5% gain and still liking the retail outlook reinvested my monies in a stock listed on my “bench” list.

HQS – has shown good recovery after, like GHM, falling off of a high price resistance point. It has gone up 15% in the past month or so and continues to show strength. So what could go wrong? Monday evenings quarterly report for one thing. If you are a gambler and think they will beat estimates, a good report should be enough to send this stock into a breakout pattern past resistance. If they do not beat estimates, it could easily fall below resistance once again.

LHCG – Yup, you guessed it another “w” pattern and up over 8% for the month so far.

MFW – is showing a very similar patter that GHM had with sequentially higher lows, just not nearly as strong. It will be interesting to see if something happens to cause a break out like GHM.

RGR – a weak report from Smith and Wesson might be a good thing for this stock since it had been on a good run recently. This recent pull back might be a good opportunity to buy some more if you already own this stock.

BENCH

LLY – is showing the signs of a classic cup and handle pattern and could be poised for a break out in the next few weeks.

ARO – This is the stock I purchased after FDO and anybody holding this stock was nicely rewarded with both the anticipation of a good quarterly report AND actually getting a good quarterly report. With a run of nearly 20% for the month and about half of it post reporting gains, it just may be time to take the short term profits. The only reason not too is the fact that ARO also boosted its forecast for the next quarter, which is always a good sign. The keys to getting in on this ahead of time were, listening to other news reports that the retail sector shook off all the February snows and actually had a good month, an increase in volume and money flow into the stock, and my teenage daughter and her friends habitually always visiting this store, even in tough economic times.

COCO – my predication of cooling off of the big February run seems to be panning out on this one.

GME – This “falling knife” has actually benefited from a couple things. One being a bit of a ‘bounce’ effect often seen after a big drop in price, historical low pricing, and a suspicious take-over rumor. Boy I love hype but this might be very unsubstantiated hype with not a lot of supporting energy. But it was nice to see this stock bounce back up nicely, at least for a short while.

GXDX – Did I mention that good quarterly reports help move stocks up in price? Well the one this company posted at the end of February has helped fuel a March run.

HRL – and speaking of good reports, this stock had one last month but has been trading really flat for this month. Looks like investors and the market are not sure about which direction to take this stock. Still keep it on your watch list but wait for a more definitive pattern to develop.

ISSI – With falling relative strength. Money flow, and MACD, things are not look up for this stock.

LANC – see above.

MAT – This one has cooled a bit from its run up from, you guessed it, a previously good quarterly report. It may be setting up to challenge upper level resistance.

STRL – Is another stock challenging high point resistance but so far has not managed a breakout.

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