MWI Veterinary Supply (MWIV) Reaching New Highs

03/08/2010 10:02 am EST

Focus: STOCKS

If the broad market is destined to move even higher now, MWI Veterinary Supply (MWIV) is one of the stocks most likely to lead the way up.

Stocks with favorable earnings growth estimates are usually the ones that make the fastest gains when the broad market is also moving up. MWIV is one such stock, and now that it has broken to fresh post-crash highs, this could be one to allocate some funds into. Check out the chart below:


Click to Enlarge

Stocks with steadily increasing earnings growth projections like MWIV will normally lead the market higher. Solid trend and money flow characteristics make the fresh RMO swing buy signal even more appealing for traders.

MWIV's earnings growth projections for the next 12 to 18 months look very bullish, and the current state of the stock's technicals also seems to have reacted positively to such favorable fundamental dynamics. The stock just fired a new Rahul Mohindar swing buy signal even as long-term money flow remains in bullish territory, and as money flow is the fuel that determines the ultimate bias of any stock's trend tendencies, this can only be another notch in the belt for those betting on further gains in MWIV.

Meanwhile, the RMO oscillator ribbon (horizontal green area at bottom of Figure 1) is also in agreement that MWIV is in a generally up-trending phase right now. Last but not least, the fact that the stock is well above its upward-sloping 50-day exponential moving average (EMA) is yet another bullish confirmation for those intending to go long on MWIV.

The fact that MWIV has traced out some very nice (stable) up and down swings over the past month might also help us to time a possible price target for this RMO swing trade entry. If we calculate a reasonable swing target for CD as 0.618 * swing AB (which came in at 6.75 points) plus the cycle low price at point C of $40.96, we come up with a price target for swing CD of $45.13.

Since point C is a confirmed daily cycle low (17 bars having transpired between point A and point C), the odds are exceptionally good for MWIV to exceed $45 per share in the wake of this most recent RMO swing buy signal. Entering long at Friday’s (March 5) open, a sell stop could be placed a few ticks beneath Wednesday's RMO trigger bar at about $42.30. If the trade follows through, trail the stock with a three-bar trail of the daily lows (also known as a Gann swing line).

If the stock does clear $45.13, consider taking partial profits and bringing the stop up to break even. Then let the rest run with perhaps a two-bar trail of the daily lows until final stop out. As always, if the broad market cooperates and continues to climb, traders latching on to MWIV will have an easier go of it, but we can still take the trade knowing that the balance of the technicals and fundamentals are squarely in our favor, regardless of what the Standard & Poor's 500 or Russell 2000 decide to do over the next week or so.

By Donald W. Pendergast Jr. of ChartW59.com

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