Gotta Like the Charts on This Stock
08/14/2012 8:30 am EST
Stocks are not too impressive over the summer, but this one has some promise as nice trade to spice up the summer doldrums, writes Rich Bieglmeier of iStockAnalyst.com.
Despite the indexes flattening out at the end of last week, the overall tone was bullish as the Dow, Nasdaq, and S&P 500 remained within fingertip distance of the current phase's high.
Of course, there can be downside, but the most recent technical signal was 100% buy, as the Nasdaq confirmed the bullish breakouts for its cousin indexes. iStock believes investors will see the Dow and S&P challenge 2012 highs, and the Nasdaq should have upside to 3,050 to 3,060 before hitting much resistance.
We would see any correction as a buy on the dip opportunity; unless there is some market changing event—i.e. Greece leaves the euro. The trend and momentum are clearly in the favor of bulls right now.
We suspect it could remain that way until the Fed meets September 11 and 12. Although there will be waves of buying and selling, we think stocks will be 2% to 3% higher, at some point within the next month, than they are today.
MARKET TYPE: Sideways/Volatile
This indicator is creeping toward a buy reading. If the indexes can tack on a few more points in the week ahead, it's green. Essentially, all Wall Street has to do is hold serve, and then type turns bullish.
MARKET LEADERSHIP: Sell
But barely, like our Market Type model, all leadership needs is a plus week for the indexes, specifically the Nasdaq, and we will see another flipper.
MOMENTUM MODEL: Buy
At the beginning of the week, MO really stretched out, only to contract a bit from Wednesday through Friday. The shortest needle says we could see some more red to start the week, but it shouldn't be long lasting.
This week, we are going to go with a purely technical pick. IDEXX Laboratories (IDXX) pulled a U-turn after testing support at $87.50. The provider of point-of-care veterinary diagnostic products appears headed for a fight with 2012's high of $98.38.
We might be a tad early, as the 12- and 26-day averages are just starting to turn bullish. Additionally, IDXX posted a bullish MACD crossover on a muscular day of volume. A series of positive moving average crossovers, along with an aggressive bounce higher off support, will catch the attention of momentum traders, which should help lift the stock and limit downside.
From a fundamental standpoint, IDEXX is right in line with industry valuations. So, we reiterate, this week's iStock of the week is a pure, technical momentum play with an initial target of $97.50, and suggested closing stop under $89.92. For those who prefer more wiggle room, a violation of support at $87.50 is as low as iStock would be willing to go.