Depending on where you are in a cyclical bull market, it can be useful to hunt for attractive charts/stocks when the market corrects. Today could be one of those days, with the major trend still up. The chart of Amdocs (DOX) caught my attention this morning. It has been in a long uptrend from its 2009 nadir (see the Point and Figure chart below) and it recently broke out on the upside after a consolidation pattern.
Let's check the charts and indicators to see if this is a good time to acquire shares in DOX. Like all our recommendations, we want to balance the risk and the return to see if a long makes sense now.
In this daily bar chart of DOX, above, we can see the generally sideways-looking consolidation pattern from July through February. At the tail end of February DOX starts to move higher, breaking above the peaks of September and December. There is a pullback in April to retest the breakout area and then a fresh rally into May to new highs for the move up.
The slopes of the 50-day and 200-day moving average lines are positive. The daily On-Balance-Volume (OBV) line made a low in late June last year and has been moving higher, telling us that buyers of DOX have been more aggressive on days when prices close higher. The Moving Average Convergence Divergence (MACD) oscillator is currently above the zero line in a positive mode.
In this weekly bar chart of DOX, above, going back three years we can see that prices are above the rising 40-week moving average line. The weekly OBV line has been constructive and is pointed up now as is the weekly MACD oscillator.
In this Point and Figure chart of DOX, above, we can see the long uptrend from the 2009 low. There are a number of consolidation patterns along the upside. Prices currently have pulled back (column of Os) to the top of the last consolidation pattern and this zone should act as support.
Bottom line: Aggressive traders could use near-term price weakness to go long DOX, risking a close below $59 looking for a rally to the low $70s.