stock pick - tag category postings

Biotech stocks can be very tricky trades and very unpredictable, but I still thought DVAX was worth a mention as it appears to have a large favorable pattern also known as a cup and handle pattern.  The entire pattern is about 9 months in duration.  That is appealing just based on how long it has been forming. To me, a 9 month cup and handle is a lot more valuable than a 2 month cup and handle chart.

Anyway, it appears that the handle is almost done forming and we could see a big breakout type move out of this pattern, possible in August time frame.  One could also make the case that the handle portion of the DVAX chart is actually a smaller cup and handle pattern itself.  That is an interesting type of symmetry and something I do not see all too often.  It is a nice clear signal that helps to make for a clean move.

I really would not want to see anything below 1.74 on DVAX to keep this entire pattern intact.  If it does move below 1.74, then there could still be a case for an eventual breakout, but just for the sake of being ‘picky’ I think that is the standard that needs to be set here on DVAX.

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I continue to like ETFC Etrade Financial here.  I like the way it pushed into the gap on 20 million extra shares (illustrated by the two yellow arrows).  To me that is a bullish sign.  It has also managed to break through the bottom blue line which represents the bottom portion of this trading range which should act as support going forward.

The fact that price was able to break back into this trading range is very bullish indeed.  After it broke through and down the blue support line near the 1.35 level, the price of ETFC was supposed to continue falling and continue making bear market lows under 1 dollar.  But the bears could not accomplish that and price recovered back inside the trading range.  Now it has been flat lining sideways.

If ETFC can hold these levels with a worst case of a quick retest of the blue support line at 1.35, it could lead to a large run near the 1.95 level which would be an ideal exit point.

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I spotted an interesting chart pattern in CNXT Conexant Systems.  It has somewhat of a scalloping pattern or saucer formation for a period of about 3 and a half months.  Two days ago CNXT did a retest of the mid April swing high but came FAR short of adequate volume on that swing test.  Today and yesterday it has consolidated.

I would say that as long as it can hold 1.47 and keep its composure, I believe it could be setting up for another attack of that blue resistance line and a breakout type move.

It may drift sideways for a week since the most recent test was dramatically weaker in terms of volume. But I still think it wants to take another chance at an upside breakout.  CNXT can move very fast so I would not be surprised to see the move come out of nowhere.

If CNXT does not hold 1.47, then it invalidates this forecast and puts the analysis into doubt.

By the way, I am noticing setups ALL OVER THE PLACE.  Certainly a lot of it has to do with the broad market powering higher and not willing to give up much ground.  That is just the perfect type of environment for ripe breakouts and positive consolidation patterns.

ETFC – Etrade Financial continues to show good signs of a new uptrend based on price structure and trading volume.  They recently reported another loss on July 22nd but CEO indicates that the recent money they raised will be enough to pull them out of their loan loss crisis.  In true market forward looking fashion, the market starts to mark ETFC up well in advance of any full resolution to their loan crisis.

BestOnlineTrades added ETFC to the recommended list this morning very near the open at 1.47.  The stop is set at 1.38 but in this case that may need some fine tuning depending on if or how much of a pullback ETFC initiates this week or next.

The ideal buy price for ETFC was at 1.35.  But here at BestOnlineTrades we were a couple days late in spotting ETFC as a possible candidate.  If a 1.35 entry was taken than it would have allowed ideal stop placement just under that support area as depicted by the red dashed line.

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BestOnlineTrades.com has spotted ETRADE corp ETFC as a possible upside trade this coming week, possible as soon as Monday morning (this morning).

Sometimes it amazes me how certain patterns and setups come to my attention.  It just so happens that I had ETFC stored on my computer’s archives of charts and had not looked at it in while.  But I can tell you that when I did look at it I was pleased what I saw.

I have found that finding new setups is not always a matter of just running a technical scan or looking at a top 10 list.  Yes, there are scores of filters and pattern analyzers out there, but nothing, I tell you nothing replaces the simple act of manually scanning through a bunch of charts with your EYES and using your mind as the filter.

That is what I did this weekend and so far I am pleased with what I see in ETFC.

ETFC appears to have a somewhat large pattern formation that resembles a large falling wedge.  Within the past few days ETFC has elected to peek its head above water and slightly pierce the down trendline that makes up the top portion of the wedge.  The volume on the very recent move was very robust.  To me it suggests ETFC may want to get a run going soon, especially with the broad market wind at its back.

Looking at the chart, I see a possible upside here of the top portion of the wedge.

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Both Fifth Third Bancorp FITB and Chemtura CEMJQ have initiated buy signals as of the early morning today and based on my previous post.  Both stocks were trading in congestion ranges similar to what was occurring in the SP500 and other broad market indices.

Today they have spoken and are now part of the BestOnlineTrades Recommended List.

FITB had a really clean and clear looking uptrend since the advance began in early March.  Up until now it has been stuck in a long somewhat sideways trading range and consolidation.  But what was clear was that it was not intending to give back that much ground.  So today we see a breakout from the resistance line.

CEMJQ has basically the same story as FITB.  I think FITB had a cleaner looking uptrend but the structure of both was more or less similar.

So for now I believe the trend is your friend with these too.

I think it is always interesting to do a side by side analysis of the broad market indices and then try to see part of the broad market action in the individual stocks.  I have always found that this helped me to gauge trends either up or down.  The broad market indices are indeed the ‘mother ships’ and the vast majority of stocks tend to follow them.  Of course there are plenty of exceptions at all times, but for the most part this is what I find to be true.

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The chart to the left is the daily chart of JVA – Coffee Holding Company which trades on the AMEX.

Amex stocks can be really spotty stocks in terms of volume, but once in while I have seen some good setups.

There does not appear to be a real setup here as of yet, but I am bringing JVA to your attention because it has shown a few good technical signals that may become more important as time moves on.

For starters you can see clearly from the chart that we have an uptrend that began from the first of March and has progressed steadily to the present.  So as long as price remains above this up trendline we can assume that the uptrend remains intact.

Now there is one thing that I need to clarify that is very important with regard to this chart of JVA.  That first swing high labeled point ‘a’.  For this analysis I need to be sure that it actually hit that high, and that it was not a bad tick (incorrect price data). I have looked at the price on a few different charting programs and they all seem to say that the high on that day was 4.91.  So just be aware that this analysis assumes that the price data on that day is correct.

Why is JVA Worth Keeping on the Watch List?

JVA is worth keeping on the watch list because the price swing I have labeled ‘b’ in the price chart above had a swing high of 4.98 and the volume there was 1.1 million shares.  In comparison to swing ‘a’ labeled on the chart which had a high of 4.91, we saw a 12X increase in volume.  So swing ‘b’ tested swing ‘a’ on 12X greater volume.  That says to me that the 4.91 level will eventually be broken to the upside.  It was dramatically higher demand on that swing point test.

So the possible setup here (which may take a month to materialize) is that the price of JVA trades sideways to flat or somewhat down on a return to the uptrend line drawn in white.  Assuming that JVA will find price support on that white uptrend line, then I would look for JVA to start another rally and eventually attempt a breakout above the 4.91 swing previously mentioned.

So this is more of a setup in waiting right now, as it still has not finished consolidating yet.  It may start doing that more pretty soon as the broad market does some more downside correcting.

A key milestone for JVA will be price getting back above the 4.00 level. If it does that then it may be near a buy signal. But for now it is just watch and wait and be patient to fill in the chart a bit more.

Of course all of this analysis will be invalidated if JVA breaks hard below the white uptrend line.  I am going to try to revisit this one down the road depending on what JVA price does.

This is a very important alert on the uranium sector, it is starting to look like the uranium price has bottomed and that the uranium mining stocks are set for a pretty good rally for the second half of the year.

Do you remember the huge rally we saw in the price of Uranium from January 2001 until June 2007 ? It was an absolutely HUGE rally, one of the most amazing rallies I have ever seen in my life, or at least since I started following markets in 1994.  Maybe some of you have seen better rallies than this one, but for me it was one for the record books.

Uranium Shot up 1842% from 2001 to 2007 !

How many other commodities do you know of that had such a huge run since 2001 ? I don’t know of any others. Crude oil has a pretty good run and soybeans did too.  But I don’t think anything else compares to how bullish a run that was in the Uranium price.  So it is pretty clear that the entire run in the uranium price was from 2001 to 2007 was a clear sign of strength.  The market was trying to tell us something and I think quite a few got the point.  But now what?

Since the peak at about 140 per pound, the price of uranium crashed down to a low near the 42 area (That crash in price from 138 to 42 went a little bit past the 61% fibonacci retracement level of the entire rally that began in 2001), but since then it has been sort of basing around and I believe it has found support and will soon get legs for at least a reactionary 61% retracement of the decline that began at the 138 level.  If it does that then it would put the uranium price back near the 100 level.  Whether or not uranium is able to go higher than that is not a concern to me for right now.  Lets focus in on the near term and see if a strong reactionary upside bounce to 100 can occur.

On the chart to the left you can see the uranium had a long trading range as defined by the red dotted lines from the period of 1987 to 2004.  This was a very long period of sideways consolidation and in fact is one of my favorite type of patterns to spot.  Why? Because a sideways consolidation that occurs for such a long period of time is indicative of a very large eventual upside move once demand is able to overtake supply.

I was not smart enough to call the breakout in the uranium price from this trading range in 2004, but Jim Dines was.  What a great call. It just goes to show that some of the best trades in the world are the ones that no one cares about and that are quietly doing their thing in their trading ranges.  Only the keen traders that are watching these basing ranges are able to capitalize on them when they notice that a change is at hand (ie. price breaks out of a long trading range).  By the way the chart above shows quarterly closing prices, this is not the uranium futures contract, they are the monthly prices from the Ux Consulting Company, LLC and Cameco Corp.

This RSI chart to the left is the 14 day RSI chart of the MONTLY uranium price.  At the peak the RSI value reached 99.97, basically almost reaching 100 which is almost unbelievable !

Also from 2004 to April 2007 the monthly RSI held consistently ABOVE the 90 level.  Also unbelievable !

I have never ever or at least very very rarely have I ever seen any stock or index behave so bullishly for such a long period of time.  I mean heck normally I get concerned when RSI gets above the 80 level and start to get really nervous about holding on too long to whatever I happen to be in. But here we can clearly see that uranium broke all records and technical milestones and shot up like a rocket with almost zero selling pressure !

Finally this chart to the left is the continuous uranium futures contract with the weekly prices. It looks clear to me that we have almost completed a double bottom on this chart and the MACD signal line is confirming a buy signal for me now.

The uranium futures contract looks like it is extremely thinly traded with very low volumes and basically almost no liquidity to be found.  But I bet there are a few smart traders that are accumulating this contract right now regardless of the bad liquidity issues.

So what if the Uranium Price is going up? Now what?

A handful of uranium stocks have had a good run from their lows of 2008 and early 2009. Many of them appear to be consolidating now in a sideways range but still the trend appears to be in the upward direction.  I am not quite sure how they will behave in a deeper stock market correction but for now they look constructive to me.

Cameco (CCJ) could come back down to support at 20 and be a good buy there.  But I also like Strathmore Minerals which trades on the Canadian exchange (symbol STM). Strathmore looks like a good 6 month trend play as long as it holds above .50 cents going forward.  It cannot break under .50 cents as that is an important area of support.  But it has a nice pattern and combined with a nice bounce in the uranium price I am giving it good odds for a nice move up.

It has a nice base from November to mid April and then a very nice breakout and sign of strength with outstanding volume.  So now it is perched above support at near the .50 level.

But again, it needs to hold above .50 and also more preferably needs to hold its breakout range from that red down slanting resistance line I have drawn.  Gosh of all the contrarian plays out there uranium sure does seem to fit the bill. I mean who in the heck cares about uranium? Not too many people.  But that spells opportunity.  It has an absolutely unbelievable run before, so now I think act II is coming up. But we shall see.

I am giving STM a rating of 2 from 1 to 10 with 1 being the highest level of confidence.

I will try to revisit this sector down the road and see how things are cooking and whether I was correct or not.

Happy 4th of July weekend to all.

God Speed to you.