What is the best place to buy a stock? Right before it breaks out on the upside. That was kind of obvious. Let's check the position of Spectra Energy (SE) and see if it should be bought now.
In this daily bar chart of SE, above, we can see that prices have been unable to break out above $30.50 or so for about seven months, which makes it a decent-sized base. Prices have shown some good improvement over the past three months while many other stocks have floundered. The On-Balance-Volume (OBV) line has been improving in the past three months, indicating that buyers have turned more aggressive and are trading more shares of SE on days when it closes higher. Prices are also above the rising, 50-day moving average and above the 200-day average, which is still pointed down. The Moving Average Convergence Divergence (MACD) oscillator is firmly above the zero line -- another technical positive.
In this three-year weekly chart, above, we can see that SE shares have rallied to close above the 40-week moving average. The OBV line, on a weekly time frame, has been moving up for three months, confirming the price action. The MACD oscillator gave a cover shorts signal, and is moving up towards the zero line and an outright buy signal. Aggressive traders could go long SE here, and add to that initial position when SE rises to $30.50. I would set a sell stop just below $27.