Tracking InvenSense Higher

 | May 03, 2013 | 12:15 PM EDT
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It never ceases to amaze me how often the markets appear to have factored in what could otherwise be considered unexpected news well before it's released. I'm not talking about always seeing a huge run ahead of what ends up being excellent news, but rather all those little signs that say, "Something is up!"

A stock I have a keen eye on today is maker of motion-tracking devices InvenSense (INVN). It only showed up in my scans last night, but it made my list of top five securities to watch today. The stock strongly resembles the daily buy strategy that I wrote about in April in Apple (AAPL) as it headed into earnings. Since then AAPL is up more than $50.

The core traits for the buy in INVN center around the shifting momentum at lows with three evenly spaced lows, shown on the chart below. It's followed by a slower correction back into the downtrend channel. At the same time, each new move on the downside in this slower channel took place with declining volume. The bears were moving to the sidelines.

Source: Tradestation

The problem with INVN? It just reported earnings Thursday and beat estimates by a penny, along with topping revenue expectations. This made it a bit of an unknown heading into today. But I wondered if a strong gap was probable, and would it still leave room to continue climbing or lose most of its immediate steam on the gap alone?

Well, INVN gapped up to open near $11 this morning and was trading 23% higher to $11.49 at midday. This is a substantial gap up when you consider that it closed at $9.32 Thursday.

$11.70 is the first major daily resistance, which INVN touched this morning before pulling back a bit. When a daily strategy like this experiences a strong upside gap, it tends to keep running early in the day and can hit that level rather quickly. Although this can take out a great chunk of the intraday potential, what really grabs my attention is the intraday action is not the only matter of interest. The strategy that has developed on INVN since January will often lead to continued upside in the months ahead.

$12.60 and just under $14 will be the next major daily resistance points following $11.70, so I will be watching INVN both intraday and on the daily charts to build a position in weeks ahead.

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