Wednesday, June 3, 2009

The Kirk Report

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Six Chart Reviews

Posted: 03 Jun 2009 10:42 AM PDT

Last week I ask for members to submit stocks/etfs they'd like for me to do a chart review. 31 were submitted and 6 of those were requested by two or more members. Let's start with those:

AAPL

AAPL

Apple (AAPL):  Technically, this is about a strong as a stock you're going to find out there. The problem is that EVERYONE knows it.

As you can see from the stochastic reading, we're now severely overbought and trading well above the 10 day moving average. Bottom line - if you're not long, this is not a good risk/reward entry point. While the stock continues to move higher (even while overbought as a sign of strength), I still think you've got to be more selective in your entry. The lack of volume in this stock's rally is a red flag and one which tells me to be more skeptical than trusting of the recent gains.

To buy a popular "everyone knows it's a winner" stock, you need to see something negative to happen (i.e. Steve Jobs is dead, Mac's start exploding, sales fail to hit expectations, margins show material decline, etc.) With all winners like this, I like to buy them when they get oversold and the last time that happened was in mid-May (see stochastic reading above) and that would have provided a decent entry point to the recent uptick. For my money now, I'd have to find an entry point somewhere around the 20 day moving average ($129) which is coincidentally the current recommended stop price. In my view, that's the definition of a good entry point - a pullback within a strong trending stock with a tight stop and a break below May's closing low at $119 would have me entirely stopped out on this one. Again, look for those oversold entries and stay away unless you can find them. Also, if owned only for a short-term position right now, I'd be using strength to take some partial profits and to reduce position size in order to allocate the capital to other positions.

FEED

FEED
Agfeed (FEED)  Another big momentum mover of late and a stock that has pretty much gone vertical in recent days. When the stock failed to move to oversold status, it was a clue that a big momentum run could come to fruition and that's exactly what happened in this one

If you didn't catch the breakout setup early (like back in mid-March and again in April) you've got to move onto other trades now unless we see a pullback entry point. Like before, I'd have to see a stochastic reading around 50 or so and a move around the 20 day moving average before I could entertain a setup in this one. Stops should be set on a break below $5 right now or violation of the 20 day EMA.

SOHU

SOHU
Sohu.Com (SOHU):  I'm starting to detect a theme - members want to take advantage of pure upside momentum. Much like the other two, Sohu has its fair share and managed a nice pop to new year-to-date highs on Monday. Right now, it appears to be consolidating a bit and still has that gap to fill from Monday's uptick (at some point). Frankly, I would have liked to see better volume on that breakout (yes, I'm always that picky).

Like the others, I don't like to chase'em unless I'm operating only on a daytrade time frame. Beyond that, I think we'll see SOHU fall back to its 10 day moving average (around $59) setting up a potential aggressive short-term trade with a tight stop at the 20 day moving average. Two days of closes below the 20 day would tell me this rally is in jeopardy.

TCK.gif
TCK
Teck Cominco (TCK):  Boy, these charts are all looking pretty similar, aren't they? Teck is currently overbought and pulling back, but has better volume than the others we've seen. I also like the fact that it refused to get oversold on that pullback in mid-May which is always a true sign of strength. I'd look to enter the stock around the 20 day moving average $14 with a stop at $12.44 on this one. Be patient until then if you desire to add this to your portfolio.

TIE

TIE
Titanium Metals (TIE):  Another strong stock and unlike some of the others the volume here is acting as positive confirmation to the recent uptrend. Still, I wouldn't be interested in giving chase right now. Instead, I'd set a price alert at the 20 day moving average for a potential entry point below there (like we saw back in the April dip) it with a tight stop around $8 per share. As with other stocks that gapped up Monday, watch closely how those gaps get filled and whether we see the buyers step in with a vengeance at those levels (which happens in bull markets but rarely happens in bears). In general, if I own a position that gaps up beyond the upper trend lines, I take partial profits and let the rest ride until stopped out.

UNG

UNG
US Nat Gas ETF (UNG):  Commodities have been doing well of late so I understand the interest in this natural gas ETF and the increase in volume alone shows that this ETF is on more people's radar right now. However, I must say this ETF hasn't participated much in the rally and is barely off from its yearly lows. Whatever future potential it has, we've yet to see it technically.

Using simple trend channel analysis utilizing the 200 day regression as a median line we see that it is still stuck within a longer-term downtrend. Until this breaks and we see both the March and May highs broken (and later confirmed through subsequent retests), I'm not all that interested. If you disagree, I'd still wait for severe oversold conditions to develop like we saw back in late May before making any attempt to bottom fish.

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