Five Stocks Ready to Run Higher

01/18/2011 7:01 am EST

Focus: STOCKS

By Greg Harmon of DragonflyCap.com

After looking at over 700 charts, I have found some good set-ups for the week. The first five of those are below to get you started.

These were selected and should be viewed in the context of a broad market picture that looks to bring lower prices for gold, but the bleeding could end soon with support nearby and higher prices for crude oil.

Treasuries look to resume their walk lower, and the US dollar index looks to find support shortly and then move back higher.

The Shanghai Composite looks to head lower, but the other emerging markets are poised to move up. The low Volatility Index (VIX) does not look to rise materially anytime soon, facilitating a further rise in the equity index ETFs.

Here are my five trading ideas for the week:

Caterpillar, Inc. (CAT)



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This stock is ripe for a breakout. It has been in a strong uptrend as shown by the rising, near-parallel simple moving averages (SMAs). The Relative Strength Index (RSI) has retreated to a level where there is plenty of upside, and the Moving Average Convergence/Divergence (MACD) indicator is starting to turn for the better. Most interesting is that the Bollinger bands are now about as tight as can be. A breakout over 95 can run to 110 on a measured move based on the symmetry of previous moves. Support lower can be found at $93 and then $90.

Cliifs Natural Resources, Inc. (CLF)



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Cliffs consolidated the last half of last week near $89. The RSI is high, but not a real concern, and the MACD is rising. If it can break through $89, then a measured move would suggest a target of $98. A stop could be placed at $87.

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EZCORP, Inc. (EZPW)



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EZCORP broke out of a consolidation zone on Friday. The MACD is curling higher and just made a bullish cross. The RSI is rising as well. The target on a measured move would be $33. Watch the open for initial direction. It moved out of the Bollinger bands Friday, so it might retrace first, giving a better entry price near support at $28.80-$29.03.

Huntington Bancshares, Inc. (HBAN)



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Huntington Bancshares has been consolidating for two weeks near the April high of $7.36. If it can break through that level, then the target would be $8.25 on a measured move higher. A stop could be placed near $7.10. Watch the MACD for a turn and cross higher as the entry signal.

Magnum Hunter Resources, Inc. (MHR)



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Magnum Hunter looks to have broken out of a bull flag on Friday, but only just short of the previous high of $8.05. If it can get through that level, it has potential to reach $9.75 on a measured move. The RSI is rising and the MACD crossed higher, suggesting the time is right. A stop could be placed at $7.50.

By Greg Harmon of DragonflyCap.com

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