There are two primary reasons why anchoring your investing decisions to a market’s Fundamental...
Fool's Picks Stand Out
01/15/2014 11:00 am EST
MoneyShow's Tom Aspray demonstrates how he looks at fundamental analysts' buy lists to find stocks that wouldn't otherwise be on his radar, then apply technical analysis to identify optimal entry points.
Just as some of the financial press was starting to talk about a correction, the market responded with powerful gains. Last week's analysis of the daily technical studies suggested that it would take several consecutive days on the downside to generate sell signals and therefore indicate a deeper correction.
The strong market internals, Tuesday, have moved the A/D lines higher and they could easily break out to the upside with another strong close on Wednesday. If instead we close lower, it will keep the recent trading range intact. The Nasdaq 100 continues to lead on the upside gaining 1.9% and the Dow Transports also outpaced the S&P 500 as I still like stocks in this sector.
Over the holidays, I came across an article Look Who's on Top Now from last summer by Mark Hulbert. The article focused on the Motley Fool as three of their advisory services had led his five-year performance rankings through June 30, of 2013.
All three of the services follow a fundamentally-based buy-and-hold strategy and typically hold their position for three to five years. I have found that those stocks favored by fundamental analysts are often worth watching as bullish technical signals can help improve the entry levels.
In the article, there were six stocks that had been recently added to their winning portfolios and they have done quite well over the past six months. Since the opening on August 5 (the first day of trading after the article was released), the six picks are showing an average gain of 30.9%. So how do their charts look now?
Chart Analysis: Alnylam Pharmaceuticals (ALNY) is a $5.69 billion dollar biopharmaceutical company that focuses on therapeutics based on RNA interference. The stock spiked to a high of $112.50, Monday, on news that Sanofi (SNY) had taken a 12% stake and bought access to one of its rare-disease treatments.
- The stock hit a low of $85 on Tuesday with the
quarterly projected pivot resistance even lower at $79.95.
- The weekly resistance at $28.50 (line a) was surpassed in May (point 1), and by October, ALNY had doubled.
- The correction in the middle of November tested the
20-week EMA (point 2), which is now at $61.15.
- The relative performance confirmed the May breakout as
it overcame the resistance at line b.
- The RS line shows a clear pattern of higher highs as
it has been a market leader.
- The weekly on-balance volume (OBV) also overcame its resistance,
line c, in May.
- The OBV looks ready to make further new highs this
week as volume has been heavy.
- There is good support for the OBV at line e and the
- ALNY is up 83.4% since the August 5th open.
CaesarStone Sdot-Yam Ltd. (CSTE) is an Israel-based provider of general building materials. It was up 20% the week after the article was published. The stock hit a high last week of $53.99.
- CSTE dropped back to the early August lows in late
October (point 3) as the 20-week EMA was violated.
- The relative performance broke out to the upside in July
as it surged through resistance at line g.
- The RS line dropped back to its WMA in November and
did make marginal new highs last week.
- The weekly OBV started to surge last summer and then pulled back to its WMA before the Aspray's OBV Trigger (AOT) flipped back to positive in
the first week of November.
- The OBV made further new highs last week as it is
leading prices higher.
- The first good support is now at $45.98 and the quarterly pivot.
- CSTE is up 46.2% since early August.
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- HAL has been below its quarterly pivot of $51.65, so far in 2014, and is testing the weekly uptrend,
- There is support next at $48.71 with the quarterly
projected pivot support at $46.95.
- The relative performance did confirm the November
highs but dropped below its WMA three weeks after the highs.
- The RS line is getting closer now to its long-term
support at line b.
- The daily RS line (not shown) violated its WMA one day
after the highs and is now trying to bottom out.
- The weekly OBV is trying to stay above its WMA and it
did confirm the recent highs.
- The OBV has next key support at the mid-December lows
and then the uptrend, line c.
- HAL is up just 9.8% since August.
Liberty Global CL A (LBTYA) is a $35.1 billion cable TV company that is based in the United Kingdom.
- The stock broke out above the August high at $82.50
seven weeks ago and hit $90.93 on Monday.
- The monthly projected pivot resistance is at $93.62
with the weekly starc+ band at $94.25.
- There is initial support now at $87-$87.50 with the
quarterly pivot at $84.39.
- The weekly uptrend, line d, is now at $79.50 and the
tests of this support last fall were good buying opportunities.
- The relative performance broke its downtrend, line e,
at the end of November.
- The daily RS analysis (not shown) is positive and is
confirming the price action.
- The weekly OBV has made marginal new highs over the
past six months but is not far above the support at line h.
I do often look at fundamental buy lists as Alnylam Pharmaceuticals (ALNY) and CaesarStone Sdot-Yam Ltd. (CSTE) were not previously on my radar. Following the technical signals can often optimize your entry point in those stocks favored by fundamental analysts. All of the other stocks will stay on my monitor list as pullbacks are needed for good risk/reward entries.
Of the six stocks, Halliburton (HAL) is closest to generating new buy signals as it has held up quite well despite the weak action in crude oil
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