Charts of the Week, Monday May 22nd, 2006
Charts of the Week are stocks that appear to be attractive candidates for short- to intermediate-term (2-6 weeks) returns based on analysis of their daily or weekly chart formations and underlying technicals. Support levels may be used as possible stops.
Analysis: BIDU: This week we highlight several popularly traded stocks that we've highlighted in the last few months.
Baidu.com was a recent recommendation that was extremely successful for us when it exploded on May 10, moving from the low 60s to the low 90s in just a day and a half. Since then it has been in a bullish consolidation, twice testing its opening breakaway gap from May 10 successfully. If the stock can take this pattern out and exceed its recent rally high on May 16 up above the 86-87 zone, I believe it can attack and take out the rally high over 91 and move into the high 90s, and then a move above 100 could get it into 115-25 zone over the intermediate-term. Obvious support is on any pullback again to that breakaway gap in the 76-77 zone. But I would look for that to hold provided the market cooperates. Over the last 8 days the stock has consolidated very nicely during a very nasty Nasdaq decline, which augurs well for future prices and should perform very well during any rebound or strong period on the Nasdaq. The June 85 calls (BDQFQ) trading around 4.80, or even the 90s trading around 3.10 could be a very interesting speculation for any move over the next 4 weeks.
Analysis: PEIX: We highlighted Pacific Ethanol in Feb in the mid-to-high teens. The stock then tripled over the following 90 days, getting up to 44 1/2 just 8 days ago, before a very sharp pullback brought it back to retest the 40-50 day moving averages. The pullback did come on pretty strong downside volume, but the strong appears short-term oversold. As can be seen from the 15-minute chart the stock is in an orderly retreat, in a 45-degree angle parallel down-channel. However, it being oversold, we'd look for a move over the 30.90 to 31 zone on volume to break this one out. Should that occur trading targets would be 34, 36, and then 39 1/2 level for short-term traders. Another way to play Pacific Ethanol is the June 30 calls trading at 3.10. Those are PFQFF. Short-term support is at 29, and beneath that the short-term pullback lows around the 27 1/2 area.
Analysis: ENER: Although it's been a favorite of ours for well over a year and remains in a strong 2-year up-channel, ENER is currently testing the rising bottoms line and bottom of the channel as well as the Feb/Mar pullback lows in the 40-41 area. This stock bounced dramatically off Friday's low below 41, and closed up on the session after rallying 3 points on strong volume. That area is a key area of support. The 15-minute chart attached shows an 8-day decline along with Nasdaq that saw stock pull back from 56 to as low as under 41. It appears the stock may have broken out of the down-channel on Friday mid-day before pulling back late in the session to retest. But the stock should participate in any market rebound, and the trading targets would be 46, 48 and 50 over the next couple weeks potentially, with a more intermediate target a retest of the 55-56 zone. Short-term support is at 40 3/4 and then 39 3/4. Beneath that the stock could be in trouble, but another way to play this one if you want to reduce your commitment would be the more speculative calls, the June 45s trading at 2.35 (EQIFI).
Analysis: AAPL: We highlighted Apple about a month ago. However, Apple at that time failed to break through the neckline of its potential head-and-shoulders bottoming pattern, and pulled back with the rest of the market, retesting the left shoulder area as well as the one-year, longer-term rising trendline before bouncing late Friday. The 15-minute chart shows the orderly down-channel that this is in, similar to what we saw on PEIX and ENER. Apple should participate in any market rebound, and my trading targets are 66, 68, and the more key overheard resistance around the 77 area. Short-term support is around 62 3/4. Another way to play Apple would be the June 65 calls trading around 3.70 (QAAFM) .
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