Charts of the Week, Monday August 28th, 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: XMSR: This week we highlight two longs and two shorts, all of which we'll be monitoring but not entering on Monday. The first long is XMSR. As you can see from the attached chart, the stock has had a nasty decline from the 2005 highs up in the mid-to-high 30s, reaching as low as under 10 a share in July before reversing sharply on heavy volume. An early August pullback on low volume was followed by more upside heavy volume and price progress. It appears that XMSR may attempt a test of the 14.90-15 resistance zone going back to May. The sharply declining channel has already been broken with that breakaway gap, and the stock has moved above its 21 and 40 day moving averages and appears to be intending to cross over -- all of which is setting up what looks like a bottom in place and a potential breakout. But that key level of 15 needs to be taken out before that can occur, and then the longer-term declining tops line up around the 17-17 , area would be next resistance. So, once 15 is taken out, we're looking for about 17 , as our initial target. Secondary target is around 21 and longer-term target up in the high 20s. The breakaway gap at around the 12 level is short-term support.
Analysis: DRYS: Our next stock on the long side, DRYS went public last year in Feb. After a brief run-up it had a long decline from the low 20s to the high single digits. That was followed by a reverse in June and July, a breakout in early August, and then a pullback/retest late last week. Then Friday's sharp rebound on heavy volume completed a successful retest of the lateral price resistance, the 40-day rising moving average, as well as the 3-month rising trendline. So the prospects are good for a retest and perhaps takeout of the 14-14
Analysis: RIG: (SHORT): This offshore driller had a very long 3-year bull-market run from multi lows in 2002 and 2003 in the high teens to over 90, before reversing in May. But the period from Jan through July was a 7-month head-and-shoulders-type top which was broken on heavy volume through the neckline earlier this month. That was followed by a subsequent very obvious bear flag, which was formed on lower volume. With overhead resistance up around the 70-72 zone and the stock trading near 69, the stock may be a short at or near here, with downside targets in the 58, 52 and then 43 levels short-, intermediate- and longer-term. Any move above the 40-day moving average and declining tops line above the 73-74 area could be used as a stop point.
Analysis: HANS: (SHORT): A former bull market darling, HANS may have been one of the best stocks of the last four years, rising from a split-adjusted level under 1 to over 50 as recently as early July. The stock then broke hard in early August, plunging on heavy volume, before the last 3 weeks have seen the stock form another perfectly formed bear flag. My only reservation with this one is it had such a big plunge from over 50 to the high 20s in such a short period of time that it may actually get a snapback in the low to mid 30s before it creates a perfect shorting opportunity. But we'll keep a close tabs on the gap as well, which is up near the 34 area, as potential heavy resistance even if the stock does break out the flag to the upside initially. If any rise comes on low volume, it may certainly be a shorting opportunity. The stopping point would be somewhere back up through the neckline at the 38-39 area. For now, we're keeping close tabs on it, with trading targets if the bear flag does break at about 24 ,, 19 and 14.
|
