February 1, 2008
RealMoney charts for February 1st.FXI, FMCN, COST, NVDA, CME and PZE.
The FXI was the poster child for upward volatility during 2007. But this is a different year and this index is back down to test long-term support. Honor the pattern…but keep a trailing stop just below support.
FMCN continues to print higher highs and lows, albeit in a volatile pattern. But notice how the slop of resistance is steeper than support? Yes, I can see that an alternative “support” line would be a horizontal line along $35, but there is a subjective component to chart analysis, and I made my choice. (Either way, the conclusion is still the same). The resistance line is so far above the current support line that it’d going to be difficult for the bulls to push the stock that high before another re-test of support. That is likely to create a lower high. As such, I’d be selling into strength.
Costco (COST) is in a pronounced uptrend and recently pulled back to test support. The best time to buy Costco was early last week, so you’re a bit late to the party. But I’d sure be bullish on any pullback to test support.
I’ve highlighted three points on a bearish “head and shoulders” pattern on NVDA. The most notable aspect of this particular pattern is the volume. Notice how the volume was increasing during the June-July runup, and was declining during the August-October advance. That’s a textbook yellow flag. Finally, the volume was markedly heavy during the break of the neckline in January. My bet is that any rally back to test the breakout level (i.e., a “throwback”) will fail at around $30 as traders act on their “I just want my money back” urges.
This weekly chart of CME shows how the stock traded in a 20% range for most of 2007, until a solid breakout in late September. But after dropping right back into prior congestion, the stock is starting to catch some bids again. On such a volatile issue, you’ve got to have a fundamental reason for owning the stock. That gives you the confidence to buy it on a pullback into the box — around $550 or so. And it also gives you the confidence to own the stock if it begins running back above the 20-week moving average again (that is, above the middle Bollinger Band).
After ramping last month in response to an erroneous mention on CNBC as a holding of Ken Heebner’s, PZE has returned to a more reasonable trading range — right between support and resistance. This is where fundamentals matter. If you like the company, your buy point on the chart is on a pullback to $11…or on a breakout above $13. And if you don’t like the company, then short it just below $11. Me? I stay away from anything that can move so quickly just because somebody in Englewood Cliffs punched in the wrong ticker. I’d rather stick with something stable…like Google (GOOG).
Be careful out there.
Real Money