Three Stocks for a Global Recovery

There is no question that we have seen signs of improvement in the U.S. economy. Last Thursday's jobless claims report showed the lowest number of new unemployment applicants since March of 2008, seemingly confirming the robust January employment report. The question is: Will the rest of the world recover along with the U.S.? Will 2012 be the year of the global recovery? Sure, there are hurdles to any potential worldwide economic resurgence. The European debt crisis, tensions about Iran's nuclear program, and the surging price of oil are just three potential disruptive factors that could derail the global markets. But the charts of some diverse companies that boast high levels of international exposure are telling us that this recovery is real. We are seeing the formation of bullish continuation patterns on a number of stocks that have already rallied convincingly. Today we'll look at three of them: TAL International (TAL), Cemex (CX), and USG (USG). Last week, TAL received some love, jumping 10% on Valentine's Day (see the green arrow on the chart below) after its quarterly report beat both earnings and revenue estimates. On that day, TAL's volume was better than 6x its daily average. The company leases freight containers for usage on ships, trucks, and trains, and would benefit greatly from a global recovery. TAL International (TAL) -- Daily Source: TradeStation View Chart » View in New Window » TAL has formed a pennant on the daily chart (see the shaded yellow are on the chart), indicating a consolidation of its recent gains. The pennant is known as a continuation pattern, meaning that the stock is in a dormant period before making its next move higher. Aggressive traders can buy now, and more cautious traders can wait for a pullback to $35, which is the stock's 20-day moving average (note the blue line). This moving average has acted as support on six separate days since Jan. 30 (black arrows). TAL's recent performance has been admirable, gaining over 40% since Dec. 19. In addition, TAL offers a substantial yield. After the company raised its quarterly dividend last week to $0.55, the stock now yields just below 6%. Despite the stock's strong performance over the past two months, TAL is only trading at 11x trailing earnings. Another stock that has formed a continuation pattern after an impressive run is CX. This Mexico-based holding company sells concrete and building materials to more than 50 countries. Since Nov. 25, CX has rallied an amazing 144%; yet, according to the chart, further gains are possible. The fact that CX hasn't reached a new 52-week high despite this rally shows just how beaten down this stock has been. Cemex (CX) -- Daily Source: TradeStation View Chart » View in New Window » CX has formed an ascending triangle, which indicates the bulls are stronger/more aggressive than the bears. After its recent run, the stock is struggling mightily with the upper boundary of the ascending triangle, where the bears are sellers -- at about $8.60. There are two ways to play the stock in this situation. One would be to wait for a pullback to the trendline, which is about $8. The second (and more aggressive) method would be to buy a break above $8.60. Another company whose business consists primarily of building and construction materials is USG. After reaching a six-month closing high on Feb. 6, USG has performed an orderly pullback in the form of a flag pattern. Like the pennant and the ascending triangle, the bull flag is indicative of continued gains for USG. On Feb. 7, an article in Barron's implied that the price of wallboard, also known as drywall, had peaked. While this appears to have been the catalyst for USG's selloff last week, the article also stated that the stock could continue its strong performance if the market's apparent bullish views on housing continue. That pullback is giving investors an opportunity to buy USG off of its highs. USG (USG) -- Daily Source: TradeStation View Chart » View in New Window » These continuation patterns are not just bullish indications for the individual stocks named above, but may be telling us something about the global economy as a whole. When stocks that possess this much exposure to the global economy perform in such an impressive manner, it could portend greater things to come.

Three Stocks for a Global Recovery

The bullish continuation patterns in TAL, CX and USG are quite positive.

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