Charts of the Week, Monday October 30th, 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: CMED: This week we feature two longs and two shorts. Both longs are in the Chinese group, and we feel are developing nice bases and perhaps setting up for some strong intermediate moves. The first long is China Medical, a previous pick and current Chart of the Week portfolio holding. After breaking out of its 4-month base pattern in early October, the stock pulled back in a nice flag pattern, and late last week began another move up before a Friday pullback again, but it appears it's emerging. We're reiterating targets at 30, 37 and 42-44 short-, intermediate- and long-term, with short-term support at the recent pullback lows at 23
Analysis: CTDC: Our next long, China Technology Development, is obviously a much more speculative stock than CMED, but also potentially very explosive as you can see from the two very strong moves it had earlier this year. In January the stock jumped from 2 to 14 , inside of a week or so, and in July it moved from 1.20 to about 5 , in a similar period of time. After a coil-type consolidation pattern developed, the stock popped out, pulled back and flagged in September, made new highs, taking out key multi-month resistance, and is currently in another bullish-looking flag pattern on low volume near the moving averages and near price support. A move out of this flag could accelerate this stock and potentially explode it in a similar move like it had back in January and July. Trading targets are at 9, 11 , and 14 short-, intermediate- and long-term, with short-term support at around the 5.90 area, and beneath that at the 40-day moving average around 4.90.
Analysis: GPI: (SHORT): The first of two shorts we're highlighting this week is Group 1 Automotive, which we highlighted back in August when it plunged below key resistance. Over the next three months of so, the stock has meandered first lower, reaching as low as 43 ,, and then since early September the stock has managed to move back up on very low volume with very flat technicals to a key 6-month resistance zone before reversing on Friday. This could be an ideal area to short this stock, with a low risk point, if it does break out over the 53 area. But despite some short-term support around 47
Analysis: OCR: (SHORT): Omnicare, also a previous short pick, broke down in the May-June period, and has failed on several occasions to take out lateral price resistance at its declining tops line. After 5 months of consolidation it appears to be ready to roll over into another down-leg. The first sign that that's underway would be a takeout of the 42 zone, not far from here, and beneath that at the 41 area from June. The 41-42 zone is intermediate support, but a break from that level could lead to the next trading target around the 36 area, the secondary target at 28 and the longer-term target in the 20 zone. Short-term resistance is around 46, and a stop may be used over the 49 zone.
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