Trading on Volume Reversals
07/15/2005 12:00 am EST
Using a system called Volume Reversal analysis, trading expert Mark Leibovit looks for a price reversal in a stock's trend, accompanied by an increase in volume. Here, he offers a trio of his latest trading ideas that have shown these reversal patterns:
"With the repeated announcements of credit card information theft from companies charged with protecting our information, we took a look at the most promising companies that might be contracted if the data storage companies sought outside electronic security help. Aladdin Knowledge Systems (ALDN NASDAQ), a Tel Aviv-based company, provides solutions for software digital rights management and Internet security. Its devices protect networks against malicious, inappropriate, and non-productive Internet-borne content. Technically, the stock has a bullish looking chart and has been consolidating at a high level for the past seven months. We are expecting a breakout and this one should provide a handsome return over the long term. Buy at market with a stop at 13.00. We are looking for ALDN to challenge the March 2000 high of 44.75.
"Conexant Systems (CNXT NASDAQ) develops semiconductor solutions for broadband communications, enterprise networks, and the digital homes worldwide. It also provides various broadcast audio and video decoders and encoder devices. It markets and sells its products to original equipment manufacturers and electronic components distributors, as well as to third-party electronic manufacturing service providers.Technically, CNXT is part of a group that has seen some solid buying the last few weeks. The stock posted a Positive volume reversal. With the NASDAQ breaking through 2100 and semiconductors leading the way, we feel that CNXT could see solid gains. Buy at market with a stop below the June 15 low of 1.40. We are looking for a move to 3.50.
"Click Commerce (CKCM NASDAQ) supplies collaborative commerce and compliance automation software and related services. It offers channel management solution for e-commerce and compliance automation solutions to improve the approval processes by connecting research departments through administrative extranets. It offers logistics, shipment and warehouse execution, and data synchronization that allow companies to communicate business information with their trading partner community through the Internet. Technically, CKCM looks to be coming out of a three-week pullback with a positive volume reversal. The Internet Software & Services group seems to be awakening after a four-week pullback. Buy at market with a stop below the May 17 low of 17.00. Our upside target is 30."