USA Today ran a story recently highlighting 10 S&P stocks with the biggest percentage gains since the last market high. This kind of story is backward looking. "Hey, you would be ahead xx% if you bought these names a year ago." Thanks. Let's look at the charts and indicators of these top-10 picks and see what the future might bring.
Looking to retire early? Then find more stocks that look like Digital Realty Trust (DLR) -- the ninth stock on the top-10 list from USA Today. (Click here for Part 8 of this series, on Global Payments.)
In this daily chart of DLR, above, we can see prices turn up in September/October last year and they never looked back. Prices quickly rallied above the 50-day and the 200-day moving averages. A bullish golden cross of those averages is seen in November. Confirming the rally is the rising On-Balance-Volume (OBV) line until this month. Buyers were more aggressive than the sellers the whole way up.
In this weekly chart of DLR, above, we can see that prices are above the rising 40-week moving average line. Maybe they are too far above. Some analysts who use moving averages extensively consider the 40-week (or 200-day) moving average a magnet -- when prices get too far away from the moving average it can get pulled back down. The OBV line on a weekly basis has been moving up from a September low and only dips this month. Momentum, however, in recent weeks has been steady while prices have gone higher and higher -- this is a bearish divergence, not the most bearish but bearish nevertheless.
So we have a stock that may be extended on the upside with momentum diverging. Should we worry? Should we take some action? Price is the most important signal we get from the marketplace and DLR looks strong as long as it stays above $90.