Earlier in the week, I wrote about some thinly traded stocks getting a boost in heavy volume. While I do track more speculative names, I also run scans for large-, mid- and small-caps with even a tighter set of parameters for technical strength.
Mid-caps have proven to be fertile ground for growth in recent months, with companies such as Michael Kors (KORS), Select Comfort (SCSS), GNC (GNC), Ulta Salons (ULTA) and Lululemon Athletica (LULU) being prominent examples from the consumer discretionary sector.
Another consumer discretionary that's been coming on strong in recent weeks is Redbox DVD-kiosk operator Coinstar (CSTR). Prior to raising its first-quarter outlook after the bell Thursday, the stock had been trending higher along its 10-week moving average. In Thursday after-hours trade, Coinstar bolted nearly 14%, to $69.79. The company said price hikes on DVD rentals had not deterred customers and would, in fact, lift results for the company.
In Thursday's regular-session trade, shares gapped down 2.9%. Before market open, noted short-seller Jim Chanos said he was short the stock because he viewed DVD's prospects as dimming quickly amid rising usage of streaming video.
Even after the gap-down on Thursday, the stock had been extended from its most recent buy point at $57.07. An orderly pullback near the 50-day line could have been in the works, but now traders and investors will have to monitor the stock for its next entry point. While a stock making a 14% leap may seem like it's too far extended to be worth following, a pullback, or tight weekly closes, can be constructive.
The company is scheduled to report the quarter April 26, but with some big news already out, it may not be much of a catalyst for a price move -- unless the company has more up its sleeve.
Less spectacular, but still showing potential, is Ascena Retail Group (ASNA). The operator of Dressbarn, Maurice's and Justice clothing chains is another stock that's been rallying along its 10-week average. That's a good indication of institutional confidence in the stock. Its most recent base, from July to January, undercut the low of the prior consolidation - a good illustration of how and why a correction can eventually result in further price progress.
After clearing its technical buy point of $17.83 on January 23, the stock proceeded to meander sideways in a very narrow trading range for a few weeks. That is bullish, as investors hold shares at a price level where they have confidence, and such action often precedes a fresh run-up. Shares gapped up in early March, and then rallied to an all-time high of $22.62 late last month before pulling back.
The retreat was in tandem with the general-market weakness that began in late March. So far, Ascena is holding above its 10-week average. This current pullback could offer a good opportunity for a new entry point. The first 10-week pullback after a breakout frequently turns out to be a short rest before a stock renews its rally. However, based on historical stock trends, a new base at this juncture could also lead to additional gains.
Ascena is expected to report earnings in the latter part of May. Analysts see income of $0.40 a share on sales of $796.93 million. That would be a significant gain over last year's top line, and a small increase on the bottom line.
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