4 Small-Caps with Bullish Monthly Volume

11/04/2014 10:40 am EST

Focus: STOCKS

Thomas Aspray

, Professional Trader & Analyst

Though stocks closed mixed on Monday, small-caps have some of the best charts, so MoneyShow's Tom Aspray studies four small-caps that have positive monthly and weekly volume analysis to see if they look attractive for new purchase.

Despite the sharp rise in the ISM Manufacturing Index, stocks closed mixed Monday with the market internals neutral. The sharp reduction in growth forecasts by the European Union early Tuesday has not helped as the EuroZone markets are a bit lower.

The S&P futures are also slightly lower early Tuesday as they formed a doji in Monday's session. A daily close below 2007 will trigger a low close doji sell signal or LCD.

The surprising cut in oil prices by Saudi Arabia pushed crude oil below $79 per barrel in Monday's session. This will not help the market's tone as I warned in my October 24 column This Market Could Hurt Stocks. The Sector Select SPDR Energy (XLE) closed down 1.6% for the day.

The market leading iShares Russell 2000 ETF (IWM) has now reached the quarterly projected pivot resistance. Still, the small-caps do have some of the best charts. In last week's article on small-caps, I discussed Sapient Corp. (SAPE), which was up 42% on Monday in reaction to a buyout offer.

These four small-cap stocks have both positive monthly and weekly volume analysis and look attractive for new purchase.

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Chart Analysis: Checkpoint Systems Inc. (CKP) is a $540 million dollar provider of loss prevention and inventory control services. It is down 17.8% YTD and is 27.1% below its 52-week high of $17.78.

  • The monthly chart shows a tight range over the past seven months with a low last month of $11.54.
  • The close last Friday was above the quarterly pivot at $12.84 with the 20-day EMA at $12.69.
  • The monthly relative performance is still below its WMA but the weekly is much closer.
  • The monthly OBV closed last month above its WMA and thehighs going back to last June.
  • The volume was significantly higher last month and the weekly OBV (not shown) is also above its WMA.
  • There is key chart resistance and the monthly projected pivot resistance at $14.10.

Badger Meter, Inc. (BMI) is an $800 million company that markets and manufactures liquid flow measurement and control technologies.

  • BMI is up 4.39% YTD as it closed at an all time monthly high in October.
  • The monthly trend resistance, at line e, is at $58.70 with the monthly starc+ band at $61.39.
  • A completion of the monthly trading range, lines e and f, has upside targets in the $68-$70 area.
  • The weekly Demand Index  broke its long-term downtrend, line g, in April 2012 (line 1) when BMI closed at $36.94.
  • The DI held above the zero line all year and has just moved above its downtrend, line h.
  • This signals a sharp increase in buying pressure last month.
  • The monthly OBV also moved back above its WMA in October.
  • The monthly volume was the highest since last January.
  • There is first support in the $54.50 to $54.05 area and the monthly pivot.
  • The 20-day EMA is at $53.40 with the 50% Fibonacci retracement support at $52.65.

NEXT PAGE: Two More Stocks to Watch

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Capella Education Co. (CPLA) is an $854 million online provider of post secondary education services. CPLA is up 6.70% YTD and yields 2.00%.

  • The downtrend, line a, from the 2010 highs was overcome in October.
  • There is next resistance at $73, which was the January 2014 high.
  • The quarterly projected pivot resistance is at $76.39 with the monthly starc+ band at $79.09.
  • The monthly RS line is above its WMA and does appear to have bottomed.
  • The relative performance resistance is at line b.
  • The monthly OBV flipped back above its WMA in July and improved further last month as the volume increased.
  • There is first support at $68.43 with the monthly pivot support at $67.66.
  • The rising 20-day EMA is at $66.89 with further support at $66.50.

CTS Corporation (CTS) is a $600 million dollar company that designs and produces electronic components and sensors. CTS is down 6.43% but is up 7.60% YTD.

  • The monthly chart shows that CTS staged a major breakout in October 2013 as resistance at line e, was overcome.
  • This breakout level was retested over the past two months as was the 20- month EMA at $16.49.
  • The 38.2% retracement support at $15.93 (from the April high at $21.55) was reached.
  • The monthly RS line did make a new high with prices and turned up last month.
  • The weekly relative performance (not shown) is positive.
  • The monthly RS and OBV completed their bottom formations in May 2013 as resistance was overcome.
  • The OBV has held above its WMA on the correction and has now turned higher.
  • There is next resistance at $19.22 with the monthly pivot resistance at $20.36.

What it Means: These four stocks have positive charts and strong volume patterns. All of these small-caps have relatively low volume so would only buy on a pullback, and to lower the risk, you might consider a smaller position size.

How to Profit: For Checkpoint Systems Inc. (CKP) would go 50% long at $12.74 and 50% long at $12.28 with a stop at $11.81 (risk of approx. 5.5%).

For Badger Meter, Inc. (BMI) would go 50% long at $53.86 and 50% long at $51.77 with a stop at $49.88 (risk of approx. 5.5%).

For Capella Education Co. (CPLA) would go 50% long at $67.92 and 50% long at $66.57 with a stop at $63.83 (risk of approx. 5.0%).

For CTS Corporation (CTS) would go 50% long at $17.62 and 50% long at $17.03 with a stop at $16.39 (risk of approx. 5.4%).

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