Todays Big Stock: Amdocs Limited Common Stock (NYSE:DOX)

Trading stocks that hit new 52-week highs can be tricky. On one hand, the idea of a stock hitting a new high seems like a great time to buy the stock. On the other hand, what if it’s the 9th consecutive day of 52-week highs? Or, what if that same stock also broke to a new high a year ago and has been trending higher ever since? Doesn’t sound like that big of a deal, does it? Those 52-week high trades are the ones I see fail more often then not. So, what might make a good 52-week high breakout trade?

When it comes to entering a stock hitting a 52-week high, I look for ones hitting a “NEW” high. What I mean is, a stock that hasn’t hit a new 52-week high in a while. In addition, and more importantly, I want the stock to have broken through a key area of resistance. This way I know that it wasn’t just any move higher. One such stock that fits both of my criteria is that of Amdocs Limited.

To review Amdocs Limited’s stock, please take a look at the 1-year chart of DOX (Amdocs Limited) below with my added notations:

Although DOX has been trending higher for the last 9 months, the stock has run into resistance at $31 (red) on several occasions, my recently last Friday. You can also see the failed breakout attempt back in the beginning of July. Yesterday the stock finally broke through its key $31 resistance on a volume increase of 50%. This would be the “NEW” 52-week high resistance breakout I like to see.  From here, the stock should be heading higher, most likely on a new uptrend.

The Tale of the Tape: DOX broke through its key resistance level of $31 to a new 52-week high yesterday. This should signal higher prices ahead for DOX.  A long trade could be entered at this point, or on a pullback to $31, with a stop set below the $31 breakout point either way.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Todays Big Stock: Celanese (NYSE: CE)

With the recent uncertainty in the stock market, I encourage readers to focus on the strongest stocks when given the opportunity. Stocks that have maintained their trend higher through the current market setback will most likely be the ones that hold their ground better during any future pullbacks. One such stock outperforming the market is that of Celanese Corp.

Celanese is a technology and specialty materials company. The company is a producer of acetyl products, which are intermediate chemicals, for industries, as well as a global producer of engineered polymers that are used in a variety of applications. Celanese’s product portfolio includes paints and coatings, textiles, automotive applications, consumer and medical applications, performance industrial applications, filter media, paper and packaging, chemical additives, construction, consumer and industrial adhesives, and food and beverage applications.

To review Celanese’s stock, please take a look at the 1-year chart of CE (Celanese Corp) below with my added notations:

CE has been in a nice up trend all year and has recently hit a new 52-week high near $56. Along the way, CE has formed a nice trend line support level (blue). Always remember that any (2) points can start a trend line, but it’s the 3rd test and beyond that confirm its importance. In June, CE confirmed the importance of the trend line I have drawn. After hitting a new high last week, CE appears to be pulling back, possibly to the trend line.

The Tale of the Tape: CE has been trending higher all year. Along the way it has created a nice trend line of support. A long position could be entered on a pullback to the trend line, while a short position might be entered if CE broke the trend line support. A trader could also enter a long position on a move above $55.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT

Todays Big Stock: Valeant Pharmaceuticals (NYSE:VRX)

Top executives from Valeant Pharmaceuticals International Inc told Reuters on Friday that Valeant wants to become the world’s biggest player in the skincare sector in about five years. The company has backed those statements up recently with a string of recent mid-sized acquisitions in the highly fragmented but lucrative dermatology sector.

The specialty drug maker said on Friday it will pay $345 million to buy the skincare unit of Johnson & Johnson-owned Janssen Pharmaceuticals. It was the second such deal for Valeant last week. The other was its planned $425 million acquisition of Sanofi’s Dermik skincare business. Friday’s news sent Valeant stock (VRX) up 4.50% to $55 per share.

Please take a look at the 1-year chart of VRX (Valeant Pharmaceuticals International, Inc.)) below with my added notations:

VRX has created a common chart pattern known as an Ascending Triangle. Combining a horizontal resistance with an up trending support forms an Ascending Triangle pattern. As the support and resistance converge on each other the pattern forms. Untrue to common perception, Ascending Triangles do not always break higher; they can just as easily break lower. This is why some traders might wait for the breakout or breakdown before entering a trade.

Just like with Rectangle patterns, Triangles will provide you with clearly defined breakout and breakdown points. In the case of VRX, the breakout would be above $55 (red). The breakdown would be below the trend line support (green), which as of now appears to be the same $50 that has acted as support over the last month or so. On Friday, VRX closed at a key area of resistance on a significant increase in volume.

The Tale of the Tape: VRX has formed a very common chart pattern know as an Ascending Triangle. A trader could enter a long position on a break above the $55 resistance OR on a pullback to $50. Stops should be set under the entry level, either $50 or $55. However, if VRX were to break below the trend line support (currently near $50), a short trade could be entered with a stop above the trend line.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!
Christian Tharp, CMT

Todays Big Stock: Berry Petroleum Company Common (NYSE: BRY)

In one of my recent newsletters I reviewed the Rectangle pattern that had formed on HAL (Halliburton Company). HAL had formed a nice sideways consolidation from $45 to $51 and recently broke through its $51 resistance. After posting that newsletter, I received several inquiries on whether or not I had any stocks on my list similar to HAL. Well, actually, I do!

Berry Petroleum is an energy company engaged in the production, development, exploitation and acquisition of crude oil and natural gas. Please take a look at the 1-year chart of BRY (Berry Petroleum) below with my added notations:

Look familiar? BRY had created a similar Rectangle pattern as HAL, only with a higher resistance. To refresh, a Rectangle pattern is simply formed when a stock gets stuck bouncing between a support and resistance. A minimum of (2) successful tests of the support and (2) successful tests of the resistance will give you the pattern. The great thing with a Rectangle pattern is that it will provide you with clearly defined breakout and breakdown points. In the BRY’s case, the Rectangle pattern formed a $52.50 resistance (red) and a $45 support (green). I also noticed that BRY sometimes finds $50 as important, which could prove useful if BRY doesn’t hold $52.50 on it’s recent pullback.

Chart patterns can also provide price targets. Simply take the height of the overall pattern and add or subtract that amount to or from the breakout or breakdown points to get the minimum price objective. For example, since the Rectangle pattern for BRY is $7.50 high ($52.50 – $45), BRY should climb to a minimum of $60 ($52.50 breakout point + $7.50 pattern height) now that it has broken higher. Chart pattern price targets are certainly not guarantees, but they are often fulfilled.

The Tale of the Tape: BRY formed a very common chart pattern know as a Rectangle. This pattern shows clear breakout and breakdown points for a potential long or short position. BRY has recently broken above its $52.50 resistance, should be moving higher, but has now seemed to have pulled back to that $52.50 level to test as support. A trader could enter a long position here in expectation of a run to $60. However, if BRY were to break below $52.50, a long trade could also be entered on the “mini” level of $50 that I have highlighted (blue).  Stops should be set under the level of entry, either $52.50 or $50.

Side note: If BRY were to move considerably lower, $45 would come back into play for a trade.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

Good luck!

Christian Tharp, CMT

Todays Big Stock: Google (Nasdaq: GOOG)

Google, Inc. (GOOG) is set to release its quarterly earnings report after the bell today. Although the price of GOOG is higher than the preferred range of most of our readers, knowing how the ”bellwethers” perform can still be informative in gauging potential moves in the market. Along those lines, technology can tend to lead the way. Tech stocks worth watching during earnings season might be AAPL, IBM, AMZN, and of course, GOOG.

The release of GOOG’s last earnings report in April resulted in a severe drop in the stock price and a trend lower that continued until June. The stock has since rallied nicely, but is the rally over? This quarter’s estimates for GOOG have been lowered. So, if GOOG has been expected to beat these lowered estimates, could that good news have already been discounted over the last month? Or could a positive surprise send the stock higher?

Below is a 1 yr. chart of GOOG (Google, Inc.) with my added notations:

The chart of GOOG is very simple: The $550 level is the key price to watch tomorrow. As can commonly happen with stocks, GOOG has rallied into earnings up to an important level. You can see how just as recently as last week GOOG tested the $550 level again as resistance. Will a strong earnings report give GOOG the lift it needs to break higher?

 

The Tale of the Tape: GOOG releases its quarterly earnings report after the bell today and the $550 level is the price to watch. If GOOG can break above $550, and hold that level, GOOG should be moving higher, thus a long position could be entered. If the stock breaks significantly higher, waiting for a possible pullback to $550 would provide a better, lower risk entry point. Either way, a stop below the $550 level would be recommended. On the other hand, if GOOG tests $550 tomorrow, but cannot hold, a short position might be entered with a stop above the $550 level.

Before making any trading decision, decide which side of the trade you believe gives you the highest probability of success. Do you prefer the short side of the market, long side, or do you want to be in the market at all? If you haven’t thought about it, review the overall indices themselves. For example, take a look at the S&P 500. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.

No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade.  Capital preservation is always key!

 

Good luck!

Christian Tharp, CMT