This column is part of chartist Bruce Kamich's series on his Top 5 Stocks in the S&P 500.
1. Flowserve (FLS)
Flowserve is the first of five names in the S&P 500 that I like on the charts and indicators. Let's take a look at this base pattern:
In this daily chart of FLS, above, I can see a good-looking, nine-month base pattern. Prices have been improving since August.
In January, the On-Balance-Volume (OBV) line made its low and then turned upward, signaling more aggressive buying and accumulation. In February, the Moving Average Convergence Divergence (MACD) oscillator moved back above the zero line for an outright buy signal. Prices are above the up-sloping, 50-day moving average line, and are above the 200-day average, which is just now turning from down to up.
In this three-year weekly chart of FLS, above, you can see the major retracement in the price of the stock, as well as three legs to the downside. Note the weekly OBV line, which is now rising from a September low. This tells us that the buying was not a one-day phenomenon. The trend-following MACD oscillator has moved back up to the zero line for a buy signal.
Strategy: With the improvement in the daily and weekly chart of FLS, we just need to pick a spot to buy, and an appropriate risk level if my analysis does not work out. I like to buy strength more than buying a dip, so I would buy FLS above $49 on a buy stop and then use $43 as a risk point.
Bruce Kamich's Top 5 Stocks in the S&P 500: