Stocks to Watch
As the indices have become very difficult to trade over the past couple weeks I have begun taking a closer look at individual equities. The following names are stocks that I am keeping my eye on over coming sessions.
$DPZ is forming a symmetrical triangle while in a long term strong uptrend. A break above targets prior highs of $103.92 followed by an initial pattern target of $111.17. As the stock has consistently ridden the 50 day SMA upwards during the uptrend, this is a logical spot to place stops.
$WWAV has broken to the upside out of a descending triangle after pausing following a prolonged uptrend. The break above the descending triangle was confirmed by the break above the descending triangle on the daily RSI. Additionally, during the consolidation period, RSI never broke below bull market range (see Constance Brown's book Technical Analysis for the Trading Professional). The first level of resistance above are the recent highs at $38.64 after which the pattern objective of $41.59 is targeted. Similar to $DPZ, the stock has been in a prolonged uptrend and should be treated as a trending stock where a portion of the position is held until a trend change takes place. Trends often run much longer than market participants expect. A break below the descending triangle base should trigger stops.
After a false breakdown below the trend channel in January, $ALJ managed to re-enter the channel and is in the process of forming an inverted head and shoulders pattern. Should the stock fall back towards the $12 mark this could provide an entry with a very tight stop below. A break above the neckline would target around the $16.75 region which also happens to be the top of the channel. Moreover, the trendline from the bearish RSI divergence at the September and November highs was broken above, quickly backtested, and held above recently. If an entry near the $12 mark is given, when using a $0.50 stop, a reward to risk ratio of 9.5:1 would be given.
$LRCX is approaching a breakout from a falling wedge that happens to be at the confluence intermediate term trendline support. Also, A break above trendline resistance appears to be nearing. Should this break above, no resistance can be found until prior highs $85.52. A break above prior highs could lead to a move to the secondary resitance of the 161.8% Fibonacci extension which can be found at $97.81. As the stock recently found support at the rising 150 day SMA, this can be used as a place to position a trailing stop.
The one index to watch is the $QQQ. A break above the descending triangle could lead to further upside. Furthermore, this was done on decreasing volume. An increase in volume as we break above would further confirm our bullish thesis. The first level of resistance sits just above at $105.85. Since this resistance is so close, we would use a stop at the short term charts bull flag low (the low from 2/9/15) at $102.55. We do not want to see the ETF re-enter the pattern. However, a break above leads to a pattern target of $107.42 and a long term Fibonacci extension target of $115.70.
$CRM has been coiling into a symmetrical triangle. Should this name break above no resistance can be found until the $64.75-$67 dollar range which should be used as the first targeted region. Depending on the location of the break above the pattern, a target near $73.70 is possible. As always, tight stops are a must and the recent lows at $55.45 is the loosest we would recommend.
In conclusion, while many stocks are showing choppy, directionless patterns, a number of quality setups are either triggering or setting up to trigger. When the indices become too difficult to trade, we look to individual equities such as the ones shown above.