Comfort and JOY

 | Dec 14, 2012 | 10:00 AM EST
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Let's have another look at Joy Global (JOY). 'Tis the season, right?

Months ago, I started looking at the weekly chart and found what I felt was a relatively important low made in July. This is where both time and price parameters came together at the same time. As far as timing was concerned, I noted the similarity of the prior swings down in time. We had prior declines of 23 to 27 weeks before this stock provided a decent rally. The low in July was made 24 weeks down from the January 2012 highs. This 24-week low was made into a key price support cluster at the $45.84 to $48.31 area. This zone includes the 0.618 retracement of a major swing, a 0.786 retracement of another, along with a 1.272 extension of a prior major swing.

Joy Global (JOY) --Weekly
Source: Dynamic Trader

It took a while to determine whether it was worth taking the buy side against this low. I remember one clear setup on the daily chart, but after that, it did not set up right for me until recently. Even if we only see a corrective rally in this stock, the upside potential is healthy. For example, a 0.50% retracement back to the April highs would take us to the $75 area. So let's dial it down to the daily chart of JOY and I will give you an area we can watch for a possible entry on a pullback where you have the edge with a well-defined daily setup within the bigger picture setup from July.

Joy Global (JOY) -- Daily
Source: Dynamic Trader

I was watching support on the daily chart that did not hold up a couple months ago. After that, I had to wait for something to suggest that it was worth looking at the buy side again. I decided that after reversing on top of some timing cycles in November that did not coincide with any major price relationships, I needed to wait for the moving average crossover on the daily chart before I would look at the buy side in JOY again.

On the daily chart I use the five-day and 13-day exponential moving average crossover. Since we saw this recently, I want to look at a buy entry in JOY ideally at the $57.53 to $58.98 area on a pullback. If we test this support and hold (I prefer to wait for an intraday trigger after testing and holding the zone), I'm willing to place a bet on the buy side. The risk can be defined below the low end of the cluster zone ($56.99 would work). The other option is to place the stop below the low made prior to the buy trigger firing off. The initial upside target for the rally comes in at the $70.58 area. A violation of this same key support zone gets me to back off the buy side until further notice.

Keep in mind that if a new high is made above the Dec. 13 high, I will need to recalculate the pullback zone for you. Please e-mail me if you need help with this. Also for more information on triggers, please refer to my recent column.

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