The daily vicissitudes of price action and opinion can erode the resolve of even the most disciplined traders’ planning and lately there has been any number of differing opinions on the condition of the market. During times like this, stepping back from the noise and distraction, expanding your timeframe, taking smaller positions, and increasing stop loss levels is the best strategy. One way to do this is by focusing on the daily charts, and here are five candidates to help start the process.
VeriSign (VRSN) provides customers with name registry and internet security services. The stock is breaking above a nearly two-year downtrend line that has helped to define the large triangle pattern it has been trading in since early 2015. It finished this week by forming a white body candle that penetrated horizontal resistance at the $85.00 level and closed near the high of the week. Moving average convergence/divergence and the relative strength index have crossed above their signal averages and are tracking over their center lines. These readings reflect improving short-term trend and positive price momentum. On the money flow side, the accumulation/distribution line is back above its 21-period average and Chaikin money flow is in positive territory, signs that the stock is under accumulation. VeriSign is a buy at its current level using a position size that allows for an initial stop under the triangle downtrend line.
Polaris Industries (PII) manufactures and sells power sports vehicles and its shares have been trading in a wedge formation since the beginning of 2016. The pattern has been compressing price action but this week a large bullish candle formed above horizontal resistance at the $90.00 level, and it looks like the stock is positioned to breakout. The stochastic oscillator has been moving in the upper half of its range since the beginning of this year and the aroon indicator, which is designed to identify early shifts in trend direction, has made a bullish green-over-red crossover. Accumulation/distribution crossed over its signal line and the money flow index, a volume-weighted relative strength measure, has been tracking higher for the past four months. The stock is a long candidate after a weekly close above the wedge downtrend line using a trailing percentage stop.
Penn National Gaming (PENN) operates gaming facilities that focus on gaming terminals including slot machines. Its shares have made several large lower highs and lower lows since the middle of 2015 but are attempting to hold their most recent low and return back above horizontal resistance in the $14.75 area. This process has formed a large rounded bottom on the weekly chart, and taken the 10-week moving average back above the 40-week average. Moving average convergence/divergence made a bullish crossover at the same time as the 2016 low and is now back above its center line, and the aroon indicator made a bullish crossover this year. Chaikin money flow has been in positive territory for most of this bottoming phase. A hammer candle formed last week, and the stock is a buy on continued strength this week, using a trailing percentage stop.
The $42.00 level on the Coca-Cola (KO) weekly chart has been both resistance and support over time, and is currently being reinforced by the 40-week moving average and the upper Bollinger band. Price stalled at this level last week after three straight strong candles that took the stock from support in the $39.50 to $40.00 area, through the 10-week middle Bollinger band and back to resistance. Moving average convergence/divergence and the vortex indicator, another trend indicator like aroon, suggest a breakout is imminent and the money flow readings support the premise. Coke is a buy after a break above resistance using a trailing percentage stop.
CyprusOne (CONE) is a real estate investment trust that develops and operates multi-tenant data center properties. Its stock price has been trading in a large cup and handle formation for the past seven months, with rim line resistance in the $50.00 area. Last week’s hammer candle formed just below resistance but finished in its lower candle range. The price momentum and trend indications, as well as the money flow readings are positive, and the cup and handle price projection targets a considerably higher objective. That said, the rim line must first be broken and hold on a weekly closing basis before entering on the long side. The risk/reward ratio is overwhelmingly to the reward side, so waiting for a confirmed break after a questionable candle is the prudent strategy.
(This article was published today on TheStreet.com)