Good investment or trading ideas can come from research reports, newspapers, magazines, friends, TV. Whatever the initial source, it is always a good idea to check the technical outlook before jumping in (yes, I am biased). Today I found an appealing chart after looking at the stocks recently upgraded by TheStreet Ratings quantitative service.
This chart of Trex (TREX), above, shows a double or triple bottom pattern starting in August. Prices have rallied enough to best the 50-day and 200-day moving averages. The On-Balance-Volume (OBV) line hit a low in September and moved sideways until this month, when it really turned north. The Moving Average Convergence Divergence (MACD) oscillator has turned up above the zero line for a buy signal. Prices just need to get over the November/December highs to give us a formal breakout.
This weekly chart, above, probably gives you a clearer look at the double bottom pattern. Prices just got above the 40-week moving average. The slope of the average is still pointed down but that is likely to change. The OBV line is improving on this timeframe. The MACD oscillator generated a cover shorts signal with its recent crossover below the zero line. If we take the height of the double bottom and project it upward from the anticipated breakout point, we get an upside price target of $56 for TREX. A decline back below $40 would upset this pattern.