This column is part of chartist Bruce Kamich's series on his Top 5 Stocks in the S&P 500.
2. FMC Corp (FMC)
FMC is the second name in the S&P 500 that I currently think is attractive and buyable on the charts. It is a little extended on the upside, so I want to buy a pullback to the top of the base pattern.
In buying a dip, you want to see the stock stabilize at a lower price point, first. In this daily chart of FMC, above, we can see a price low in September and then a retest of that low in January and February of this year. Prices broke out in April over the highs of November and March and now look extended on the upside. Prices are above the rising, 50-day simple moving average line.
The slower-to-react, 200-day moving average looks like it has turned flat and is about to turn higher. The On-Balance-Volume (OBV) line has bottomed and turned up, too, signalling heavier trading on days when FMC has closed higher. This is a sign that buyers have become more aggressive in their accumulation of FMC.
This weekly chart of FMC, above, is attractive -- if you look past the big decline. Prices sold off in three legs to the downside and now have crossed above the 40-week moving average line.
The slope of this long-term moving average should have kept you out of FMC all the way down, but now it has turned and is giving us a reason to approach the long side. The OBV line has bottomed, on this weekly time frame and the Moving Average Convergence Divergence oscillator is back up to the zero line (positive) for an outright buy signal.
Strategy: FMC has made a nice initial move to the upside, but is now correcting that strength. I would like to see a pullback and retest of the $43 to $42 area -- the top of the trading range before the breakout. If prices pull back and hold in this area, I can see entering the long side with a sell stop below $39. Successful trading and investing is about controlling the risk.
Bruce Kamich's Top 5 Stocks in the S&P 500: