Saturday, December 02, 2006

Watch List for Week of Dec 4, 2006

Stocks in a strong trend that have pulled back into the 10-30 EMA price zone.

Bullish setups:
* MMC - Stock in wide trading range for 2 years. $32-32.50 is significant resistance area.
* HAS - One-month flag pattern. Strong volume on 10/30-11/3 suggests $26-27 area will have support. Stock pulling back to 20-EMA. If enter, set stop just below $26.
* MSFT - Possible bounce off 30-EMA with hammer candle.
* CAL - Pullback to 20-EMA. Strong volume on 11/15 suggests $40 is a support area.
* TWX - $20 should be strong support (it had been strong resistance) due to recent breakout above $20 on volume. Stock is coming back to retest $20 and bouncing off 20-EMA.
* CDWC - flag for 2 weeks. A close above ~$71 on volume would be the breakout.
* SMG - one-month consolidation. Look for breakout above $50 on volume. Also a Bollinger band squeeze play.
* CHH - at 20-EMA with hammer candle.
Bearish setups:
* RDN - stock went sideways to slightly down from Jul to Oct, when the market as a whole was in an uptrend. Downgap and continued fall on 10/19 from missing earnings by over 10%. Possible bounce off 20-EMA as resistance.
* CVS - began downtrend on 9/21 when Walmart announced its $4 prescription drug plan. Stock just bounced off 20-EMA and $29 level is serving as resistance. If enter, set stop just above $29.
Bollinger band squeezes.

Bullish setups:

* D - one-month flag, though not sure what's up with the Nov 1-2 price action.
* ED - one-month flag.
* FE - this one broke out already, making a new all-time high. It's also a BB breakout on the weekly chart, and trend on weekly chart is especially strong. Price action shows a lot of flags this year, and each one so far has successfully completed. Based on flag pattern, expecting stock to move to at least $63 before the next consolidation.
* AIZ - one-month flag, possible bounce off 20-EMA.
* OMC - one-month flag. Flag breakout would also be BB breakout. Bottom of flag is also right on top of 20-EMA.
* MDU - already broke out of a one-month consolidation, making a new all-time (38-year) high. MDU is a very steady stock. On monthly chart, price has been above 10-EMA continuously for over 3.5 years; it did the same thing before for 10 years (1989-1999). Based on flag breakout, expect price to move to at least $28-$28.25 before next consolidation.
* EAS - already broke out of BB and a 3-4 month symmetrical triangle with 150% of 30-EMA volume.
* BKC - breakout of flag and BB already happened on 11/30 with over 250% volume. Wait for retest of $18 or 20-EMA for lower-risk entry.
* XTO - breakout of flag and BB already happened on 11/28. Wait for retest of $48 or 20-EMA for lower-risk entry.
Bearish setups:
* CNO - in many recent months (but not always), a squeeze of the Bollinger bands was followed by a downward move. Expect possible bounce off 20-30EMA.
* HCR - topping pattern from Aug-Sep; broke 9-month support trendline on 10/6; 20-EMA has been resistance for the last month.
* SGY - VERY volatile stock, so be careful (smaller position size or use non-directional spread strategy). Bollinger bands are very tight compared to 2-year history. It is historically followed by an explosive 10% move with immediate explosive (sometimes stronger) counter-move. But initial direction is very difficult to predict reliably, even when using trend-following techniques. If using non-directional spread, consider closing the winning side first, due to the tendency for a counter-move.
* USPI - price is currently right at a resistance trendline drawn since Feb, and $26 seems to have been established as a resistance level. Could take bearish entry now with stop just above $26 or if closes above trendline with volume. All Bollinger squeezes since Feb have so far been followed by a downward move.


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