Top Value Stocks - Base Pattern Breakouts
The Momentum Rider investor series continues as we take a look at the coming week's action and also more areas to look for to find top value stocks. This week is going to be focused on value stocks with basing pattern breakouts. Long consolidation breakouts can be very good and safe trades as the price support is well established. Once the momentum moves out of the base to the upside, any remaining shorts will need to cover and the move can be fast and very powerful. These stocks have good valuations and should see substantial moves up as the world economies recover and they can be viewed as both good trades and good investments.There were a number of positive reports today that helped the markets recover from a several day slide. The S&P 500 did touch our first support of 1300 on Monday as we discussed in Sunday's newsletter and then bounced with dip buyers. Today reached a high of 1330 before retracing at the end of the day to finish at 1324. It was a day that was filled with better than expected manufacturing data out of Germany, India, U.S., and China. That was important to keep confidence up after a very good January.
It looks like China is still headed for a softer landing than many have predicted which is critical for commodities and the rest of the markets. The day also saw more private sector job creation, decent home sales, good earnings from Whirlpool, and a Facebook IPO announcement. All of this added up to more buying and the continued "melt up" higher. I use "melt up" versus a strong move because the volume is extremely light and most of the investment community is still very guarded.
The trend is still up and staying above the 20 SMA and the DJIA is close to its 2011 highs. Until the trend breaks below the 20 SMA, it is best to stay long. The last 2 weeks have been primarily a consolidation as the S&P 500 was at 1314 on January 19. The overbought indicators have backed off some but are still stretched.
My biggest concern is that the bearish rising wedge in the S&P 500 is still intact. It needs to be carefully watched at these elevated price levels and after such a strong move up without a meaningful pullback. At this point, everyone seems to believe Greece will get a finalized agreement because it is priced into the market.
Using the Power Stocks Table:
(1) Risk: Conservative (Cons); Moderate (Mod); Aggressive (Aggr); Speculative (Spec)
(2) Stop: Typically use a 3 to 4% closing stop below the entry price
(3) Trailing Stops: Use the 10 EMA (Swing) or 20 SMA (Short Term Trader) for protecting gains once above it; SMA = Daily Simple Moving Avg; EMA = Daily Exponential Moving Avg.
Value Stocks to Buy for 2012 - Base Breakouts
Today's stock picks will be value stocks with technical base breakouts. These are typically fairly safe long entries once they get some momentum up out of a long consolidation. The longer the consolidation, the stronger the up move will be.
Top Base Pattern Breakouts - Value Stocks:
Investor Notes:
Investors should look at our recently posted blogs on top value stocks in energy and precious metal mining stocks. Both areas look ready to rebound after going sideways or finishing up long downtrends. Many of the precious metal mining stocks had big reversal moves recently. The top gold and silver stocks and ETFs were in a blog on our website. (Click here to read it).
Stay tuned for some blogs to come on China's market and their top stocks. Also, look for a very important blog post on US Treasuries this week. A very safe investment will be revealed and it is not what you think.
Natural
Gas prices came back down to retest the previous bottom for what should
be a double bottom basing pattern. CHK has very strong support at
$20.00 going all the way back to 2010 and it should hold that level.
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Good luck in your trading and investing,
CEO Jalexa Trading Consultants, LLC
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