Real Money Charts (March 26, 2008)
Here are the charts featured on tomorrow’s Real Money column: AAPL, CSIQ, MOS, CALM, MTW and SDS
I’ve highlighted the rising RSI and declining price during the month of February to illustrate how a secondary indicator can provide an early signal of a trend reversal. AAPL went into a volatility squeeze between mid-February and mid-March, and has since broken out to the upside…and has surpassed the 50-day moving average. I think this is a buy on pullbacks. And since we are getting into the seasonally weak time for tech, I think we’ll see a buyable pullback soon.
CSIQ has been in a trading range since mid-January, with support at around $17.50 and resistance at $23. The stock is now in the middle of that range. But yesterday’s 20% move on about 150% normal volume means something. I’m looking for CSIQ to break out of this range, though it will likely take a bit more work before that happens.
This weekly chart of MOS shows a negative divergence between the bullish price action and a bearish RSI. Notice how the pullbacks continue to find support at the middle Bollinger Band, while the most recent peak is not as extended as the early January peak? Maybe I’m splitting hairs, but I’d be careful of MOS right now. Yes, it is at a great buy point, and if you like Mosaic–the company–then this is your opportunity buy the ticker. But I’d suggest protecting it with a fairly tight stop.
CALM has been anything but calm over the past year. The stock broke out above $7.5 during late 2006 and has recently tagged $40. The best buy points have been on pullbacks to the support trendline I’ve drawn. Unfortunately, the stock just doesn’t pull back that often. Still, picture the probable price action in this stock in the coming weeks. Can you envision it running up to $50 without any kind of break? Can you envision it taking a rest for a while–perhaps pulling back in consolidation?
My bet is the latter scenario. As strong as this stock looks, I’d avoid buying it until it provides a better entry.
Something’s going on with MTW. Notice how the stock had been bouncing along the 30-week moving average during late 2006 and all of 2007. But the stock got a 40% haircut between late December and mid-January. Now, the bulls are marking up the stock; but are unable to move it above the 30-week moving average. So support has now become resistance. Until that changes, I’d stand aside.
The SDS has been a favorite of the bears because it effectively gives you 2:1 margin on an S&P short position without paying interest. But this ETF sure looks like it’s topped out to me. Also, the 50-day moving average is now back above the current price. That’s bearish. But before you go counting the SDS out and ratcheting into the SSO (the opposite of the SDS), consider the $60 level. Each time the SDS has pulled back to that level, the decline has stopped and we’ve seen a rally. I’d consider buying the SDS if it moves back above the 50-day moving average. But I’d also have a tight stop in place just below $60.
Be careful out there.