Weekend Stock Ideas - Week of March 26th

After rallying over 150 SPX points since the start of the year, it's both natural and healthy for the market to pause and digest its gains. While time frames differ among market participants, my view of a 1-year chart of the SPX keeps me bullish for multiple reasons. For one, pullbacks have remained shallow as the market indices continue to make higher lows. This tells me that investors' appetite for stocks is still strong, as they're willing to commit capital at progressively higher prices. Secondly, all major moving averages are aligned in bullish fashion.  When the 10-day MA sits above the 20-day MA which lies above the 50-day MA, it's my "green light" to be involved in the market, as it tells me the trend is decidedly to the upside. Finally, there has been little evidence of any real distribution, which would reveal itself through heavy-volume down days. Market corrections are often preceded by "clusters" of distributions days, as institutions that previously supported the market begin to unload stock and shift to the bearish side. Until these three bullish elements reverse, I'll continue to look to enter stocks that are acting well with strong charts. Below are some of the stocks I'll be watching next week:

With two high-volume gap-ups in the last two months, MDVN has established a pattern of making strong advances and then consolidating on light volume. Since gapping up on over 8x its average daily volume on 3/8, the stock has traded tightly above the 20-day MA on very quiet volume. Those that wanted to take profits have likely already done so, and the stock looks ready to break out to new highs yet again. The pivot point is at the February high of 76.65, and a break above this level would confirm MDVN's next leg higher.

As I mentioned in my last blog post, stocks basing right below all-time highs always attract my attention. Oftentimes, the big moves in leading stocks begin once they break to new-high territory, as all shareholders are profitable and the stock is free to fly with no resistance in "blue skies". N surpassed its IPO high from 2007 in December, and has essentially been basing for the past four months. The stock tried to break out in February, but instead went on to form a base-on-base pattern. With resistance clearly defined at 50, I'll be watching for volume to kick in for a move to new highs.

PAY has formed a short three-week consolidation within an overall basing pattern that goes back to last April. The right side of the stock's base features multiple bullish aspects, including various high-volume up days and support at the 20-day moving average. The pullback over the past few weeks appears to be a handle, which typically serves as the final shakeout of weak holders before the stock breaks higher. PAY has traded within a very tight two point range as of late, showing institutional support and a lack of real selling. Given the constructive price action, PAY could be bought within the current base with the 20-day MA as a stop, or it could be purchased on a break above 51.60.

After finding support at the 50-day moving average in mid-March, EXPE promptly rebounded to its previous resistance zone around 34.50. The stock has spent the past two months consolidating in a three point channel after breaking out of a longer-term base in January. The recent highs coincide with the stock's all-time highs from late 2007, giving more significance to a potential move above 34.50. As always, I'd like to see volume kick in on a move to new highs to confirm the validity of the breakout. 

My personal holdings remain unchanged this week, as I remain long AAP, KORS, NTES, DLTR, and POT.

Feel free to leave any feedback or comments in the section below, or hit me up on Twitter (@CommAveTrader).

Weekend Stock Ideas - Week of March 19th

With the uptrend firmly intact for all major indicies, the market remains in the hands of the bulls. The gap down on 3/6 appears to be nothing more than a one-day sell-off, as distribution days have been scarce. With the SPX's 10-day moving average above the 20-day MA above the 50-day MA, the only option is to look for potential long candidates. Uptrends can last far longer than many expect, and there is no evidence to suggest this rally is nearing an end. With that said, here are the top stocks on my watchlist going into next week:

After gapping up on 5x average daily volume on 2/14, RAX has spent the past month consolidating between 51 and 57. This basing action has worked off the stock's overbought condition, as it has corrected through time rather than price. The reversal to the upside on 3/6 shows buyers were eager to load up on a pullback, and there has been no significant selling within the current base. Given the stock's recent explosive move, this basing action is particularly impressive, as it demonstrates how investors are unwilling to dump shares even after a substantial advance. RAX breaks out to new highs above 57, which is where my alert is set.

Besides its healthy basing action right below all-time highs, VFC has another major positive on its side -- it hails from a very strong industry group. Many luxury apparel stocks have seen strong price action recently, as the job market recovers and consumers feel increasingly confident in their financial well-being. VFC's 5-week base has seen very tight trading, as the stock has only corrected 4% off its high in the current base. Volume on up weeks has dwarfed the volume on down weeks, showing institutional accumulation. I'm watching for the stock to break over 150.

After undergoing some selling pressure in late January and early February, FTK has spent the past month climbing up the right side of its base. Volume patterns over the past couple of weeks have indicated that the initial selling has subsided, as shares transfer from weak hands to strong hands. The $10-level brought out buyers, and more recently the 20-day moving average provided support on Wednesday and Thursday of last week. I'd look to buy the stock over 12.70, while potentially adding if it can clear 13.70.

 I provided a longer-term chart of NTES to illustrate the massive base that the stock is threatening to break out of. Since bottoming in October of last year, NTES has put in progressively higher lows, as investors have been willing to snatch up shares on pullbacks. Over the past five days, the stock has based between 53.40 and 55, with the upper range coinciding with all-time highs. Stocks basing right below new highs always find their way to the top of my watchlist, and NTES is no exception -- I'll be looking for a high-volume move over 55 to get involved.

The current 5-month advance for WCC has featured multiple strong-volume up days, while any real selling has been virtually non-existent. The stock has been basing for the last six weeks as it digests its gains. The 50-day moving average provided support on 3/6, and WCC looks poised to continue its advance on a breakout above 67.40. 

Feel free to leave any thoughts in the comments section below, or at my twitter page (@CommAveTrader).

Intro Post

I decided to start this blog as a way to combine my passion for stocks and my interest in writing. I want to document my progress as I aspire to develop as a trader, while also sharing stocks that I believe have to potential to deliver strong returns. My ventures in the market over the past few years have had their ups and downs, but through it all the overarching message I've learned is the following: The first step to making progress in the market is cut losses quickly. So many other traders have expressed that same philosophy that the idea is bordering on cliche, but nonetheless I can't help but emphasize it as my number one rule. I've learned first-hand the dangers of letting losses go unchecked, and the psychological trap of hoping a position gets back to break-even usually ends up devastating an account. A disciplined loss-cutting strategy is essential to survival, but alone it's obviously insufficient. On the offensive side, sound stock selection defines superior returns from average results. My intentions aren't to find stocks that are undervalued or overlooked; cheap stocks tend to get cheaper. In strong markets, I want a portfolio full of institutional-quality growth stocks. These are the innovative companies with explosive earnings and sales growth that mutual funds and hedge funds can't get enough of. They support them on pullbacks and propel them to new highs, and evidence of their actions shows up charts. As charts provide a visual display of investors' emotions, the same price patterns have repeated themselves since the market's inception. My goal is not to try and pick a stock's bottom, but rather to buy when it has the greatest probability of continuing higher. To put it concisely, my strategy revolves around buying fundamentally-sound stocks with high EPS growth and high ROE as they breakout to new highs. I look for familiar chart patterns on both daily and weekly time frames, and I typically hold positions for months (unless of course I get stopped out). In this blog, I'll try and identify stocks that meet my defined criteria and share them by posting charts. I'm definitely a chart addict, as I know many others are on Twitter and Stocktwits. Here's to hoping to uncover some of the market's big winners -- feel free to leave comments or give me feedback (@CommAveTrader on Twitter).