Real Money Charts (April 18, 2008)
Here are the charts for Friday’s column on Real Money: TEX, AKS, MRK, MAS, PBT and VWO.
TEX has been consolidating for the past month in a series of lower highs and higher lows. Yes, we could look at the November low, the January low and the March low as an “inverse head and shoulders” pattern, but here’s the bottom line: If the bulls manage to push TEX up out of congestion everybody who bought the stock since early November will be profitable. That makes for some happy campers who are not likely to sell the stock.
Back in March AKS was in consolidation when I recommended it on Fast Money. My reason for featuring AKS rather than U.S. Steel (X) was pretty simple — I thought AKS would outperform X because of the simple fact that everybody always talks about X as being “the” stock to own in the space. As such, the pattern was pretty extended and didn’t seem to have much potential. Well, they both performed pretty well, with X moving up 22% and AKS moving up 24.10%. Either way, steel has been the place to be. I’ve put a 10-day moving average on the chart to illustrate a potential trailing stop reference. If the stock closes below that key moving average, it’s probably time to take profits.
MRK has been trending lower in a series of lower highs and lower lows. The last 3 peaks provide obvious points of resistance, where any return is likely to be met by selling. As such, it’s really tough to see this stock moving very much on any rally. I’d just stay away and let it heal on its own. And if I was long, I’d sure be a seller if the stock breaches the April low. And after Pfizer’s lousy earnings, that level could be breached sooner rather than later.
A diverging series of lower highs and lower lows ultimately begs for a reversal as the bears just can’t keep the support trendline intact. We could already be seeing this as the early January low extended well below the lower Bollinger Band while the March low is above that lower Bollinger Band. That’s a higher low with respect to downside volatility. Still, I think the stock needs to break above resistance before I’d consider the downtrend in trouble. Until then, I’m a seller on rallies.
PBR was very thinly traded until early March when volume picked up dramatically. But one thing has remained the same — the uptrend! This stock continues to run along the upper Bollinger Band, which is the strongest thing a stock can do. I’d use the 10-day moving average as my reference for a trailing stop.
VWO formed a double bottom in January and March as it bounced off $87.50. But it was the little consolidation pattern in early April that could provide the juice to push the stock through prior support. Notice how the “flag” pattern occurred on light volume — an indication that the pullback was really due to simple profit-taking rather than concerted distribution (which would have, by definition, taken place on high volume). I’d be a buyer on a move above $102.50.
Be careful out there.
Real Money