The retail sector in general has been strong, and we see Gap Inc. (GPS) stock breaking to a fresh new 52-week high to continue the uptrend established from December 2012 and reaffirmed with the March 2013 breakout.
Price completed five retracement or ‘flag’ swing trading opportunities off the support of the rising 20-day EMA and price has now compressed around the $41.00 “value area” or midpoint of a compression pattern.
Gap Inc. (GPS) Daily Chart:
Tuesday’s pro-trend continuation and breakout continued from Monday’s breakthrough above the $42.50 level and we’re carefully watching for additional upside price action as price moves away from the $42.50 breakout level (short-sellers buy-back to cover and buyers step in to buy or add to existing positions—as is the case with any successful breakout event).
Gap is bullish unless we see a sudden ‘failure’ and reversal back under the breakout point which could carry price to the next lower support target—a retracement—of the rising 20d EMA just under $42.00 per share.
Finally, Tesla Motors (TSLA) Daily Chart:
I highlighted the breakout in Tesla (TSLA) shares for Monday’s stock update and the breakout event continued through Tueday’s session, though we see a clear caution sign developing from the intraday reversal and—so far—bearish candle developing into $120.
While the trend continues and Tesla (TSLA) has completed three retracement or bull flag opportunities, we see price extended from the rising 20-day EMA on a sustained rally where it’s generally “too late” to play a clean/low-risk breakout (which triggered Monday), but of course, not at all safe to play a retracement (price needs to trade lower to generate a retracement entry).
Though price accelerated in May along with volume, price continued higher yet volume trailed lower all the way to the present price breakthrough to the new 52-week (and all-time) high for the stock.
May 2013, itself, should remind us why it’s safer to trade with a trend than against it—note the two large gaps and the non-stop upward price impulse as investors along with traders rushed to get in on the upward price action and media attention.
Continue watching these five selected names, along with any of the other 100+ names trading at new 52-week highs.
In Tuesday’s simple “show me NYSE stocks at new 52-week highs,” I added a filter of “show me only names with 20-day average volume greater than 2,000,000 shares per day and 38 stocks appeared on the list.
Of these 38 moderate/high average volume stocks on the NYSE making new 52 week highs, 21 of them (55%) were from the broader financial sector (out of nine major sectors).
Note that three of these names are popular brokerage firms (eTrade, Charles Schwab, and Ameritrade).
By Corey Rosenbloom, CMT, Trader and Blogger, AfraidToTrade.com