Real Money Charts (April 7, 2008)
The following charts are in my RealMoney.com article for Monday, April 7th: GE, FDG, ITB, DD, UTX and HPQ.
GE broke out of a prolonged downtrend in mid-March and has been on the move since then. It has paused for a few days to allow profit-takers to do their business…and has then resumed the new uptrend. I’d be a buyer on the next breakout.
FDG had been trading in a tight range for more than a month, setting up an expansion in volatility. That expansion started just last week when the stock broke to a new high on strong volume. I’d put a stop back in the middle of prior congestion as a way to limit the risk on the trade.
This weekly chart of ITB shows how this ETF had been moving lower for the past couple of years. But these last few months sure look different. With the lowest low printing in early January, the ITB has been moving higher ever since. I’d use $20 as my reference point for support. If the ITB drops back below that level, I’d close the trade. But there is no way I’d be short — that money has been made.
I’ve highlighted the role of the 50-day moving average in this daily chart of DD. Notice how any rallies were capped right around the 50-day moving average in late 2007. But during the past couple of months, DD has traded above the 50-day moving average and any pullback has found buyers at this key moving average. DD recently broke above $48, which had been keeping the bulls at bay since November. I’d keep a stop just below that level to contain my risk.
This daily chart of UTX shows a similar dynamic as DD — only a bit earlier in the process. With the 50-day moving average now just starting to trend higher, the question for the bulls is whether they’ll be stepping up and buying on any pullback. I’d still look at $74 as short-term resistance for any additional rallies, but I’d also count on the 50-day moving average to define support. So I’d be a buyer of UTX now, with a tight stop.
HPQ isn’t showing anybody any love. The stock has been consolidating in an ever-narrowing range right at the 50-day moving average. Because of its proximity to the 50-day moving average, there is really no prevailing trend to use as a frame of reference. So I’d just use $48 as resistance and $46 as support. Any move above (or below) those levels dictates the likely direction the next trend will take.
Be careful out there.
Real Money