I've been waiting to catch the new Transformers movie, and this is probably a good week to do it -- though you may want to check out Chris Ciaccia's review before you head out to see it. Sure, we may have a lot of economic data this week, but with only three and a half days of trading, I would expect things to be slow. If you are a trader in the U.S., this is a great week to take a vacation. I expect even the traders staying on to fight the good fight will only do so halfheartedly.
When things get thin or slow, I certainly prefer to turn to baskets for buying and selling. I just feel as if it's a bit risker to buy a breakout on this type of trading than it is to pick up a single name. I am willing to mix it up, though, and throw in some smaller stocks, in order to try to catch a big breakout. This can certainly occur during low-volume, light-trading days.
The first name I'm looking at is Ctrip.com (CTRP). Online travel has remained hot, and Ctrip treated bulls well during earnings. So maybe this sector isn't as hot as the 3D-printer group is, but it too could catch momentum. There is a rather ugly-looking cup-and-handle pattern on Ctrip, but it fits the size and time frame correctly for a continuation move off the May lows to the June highs. The upside target from current levels would be $71.
Ecolab (ECL) isn't quite as attractive as Ctrip is, although this is another one I would include in a buy basket if the stock closed above $111. On an intraday basis, the $111.50 area has held since March, but Ecolab certainly has a strong uptrend. The stop here would be clear at $106 -- and the momentum is starting to pick up. This is a stock with potential, but it isn't quite there yet. Both price and momentum just need a little push.
Homebuilders such as Lennar (LEN), PulteGroup (PHM), Taylor Morrison (TMHC) and D.R. Horton (DHI) would make a nice little baskets themselves. These are my top candidates in the homebuilder sector, based on the current short-term view. I would likely look at these just as a group -- I would not try to pick a single name, hoping to get lucky.
A move above $2.32 would really set up Hitchinson for a big push higher. Today is already showing a breakout move, and the stock now has new support just below $2.20. The momentum and cash flow are there. The stock does carry some risk, though, as it is two days into a big move.
Mitek is very similar, but support is much closer. For a stop, a trader could just use today's low or the $3.20 area. Again, momentum is key, and it's breaking out with the price. I'm seeing similar upside potential for Mitek, seeing as a very long base has formed in the stock.
Support.com is probably the weakest in terms of the intraday move, but if the stock holds around $2.50 by the close, I believe this one could be set up for a quick push to at least $2.70. The risk-reward scenario is a bit less attractive, but the support is much closer in terms of stop levels, which are $2.48 and $2.32. I would not buy this one as a standalone. But, as part of a basket, it would make for an interesting addition.
I want to see how the early afternoon shapes up, but these are some names I'm looking at buying as a basket this week.