Real Money Charts (April 23, 2008)
Here are today’s charts on Real Money: MA, DSX, CSX, BIDU, UNH and PAL.
While Visa (V) seems to be getting a lot of love from the financial media these days, MA just keeps chugging along. After bumping up against excess supply at $220 for the past several months, MA has finally chewed through that level and is now headed higher. If you’re in it for the long haul, try keeping a looser stop than normal — remember that this is a weekly chart.
DSX was in a volatility squeeze from late March until just a few days ago when the stock broke above resistance on increasing volume. The problem with this setup is that the February high looms large. You’ll notice that the trading volume in mid-February was fairly heavy, which adds up to a lot of emotional and financial commitment. So I’d expect selling pressure when the bulls hit that level again. But if the stock breaks above prior resistance pretty soon, it’ll be so extended that it’s risky to buy. I’m hoping to see some consolidation around $30 so that there is a bit of a base from which to spring higher through current resistance. Then I’d buy.
CSX has been on a tear since January when it broke above an established base. During the first part of April, the stock was in a downward consolidation pattern which took it right back to the 20-day moving average. Last week’s gap broke that pattern and CSX is once again on the move. The safest trade is to wait for a pullback to $58 before buying. But if you’ve just gotta get to work on the railroad, try taking just a little bit now and then wait for a pullback.
This daily chart shows BIDU going almost parabolic. Since the March low of $200, the stock has darn near doubled in price. This is just so risky to buy right now. The stock could re-trace $50 before you’d even know whether the stock had topped out, or was just pulling back to test support. That’s a problem that I can’t help you with — but I can tell you that there’s no shame in taking some off the table before the next guy does.
UNH is really a broken stock. We can see the current support level at $33.50 now. But I’m not concerned about support; I’m concerned about resistance. There is so much pain etched in this chart that I fear any buying pressure will be met with eager sellers who are happy to sell you all they have. But I wouldn’t short this on a break of support either. The easy money has been made on the short side.
A reader wanted me to take a look at PAL, noting that he really couldn’t tell whether PAL was in an uptrend, a downtrend, or no trend because the stock had just been all over the place. Well, I can help you with that! First, let’s dispense with the easy stuff. Yes, the stock has been in an uptrend, a downtrend, and no trend. But the important question is: “What now?” Here’s what I see. I see a stock that got out of hand in February as novice traders seized on palladium and started equating it with the next potash story. Well, that didn’t’ work out so well and now the stock has taken an Icarian fall from grace and is finally being bought at $5. The real question is whether current demand at $5 will be sufficient to soak up all that supply from disheartened sellers who really thought they were onto something. That question will be answered when the stock falls below $5. When that happens, I’d bang the bid and move on.
Be careful out there.
Real Money