My colleague Jonas Elmerraji of TheStreet recently ran down five stocks whose charts he sees as pointing to possible "breakouts" this fall, and my own technical analysis shows plenty of positive signs for his picks.
Let's check them out:
Rockwell Automation (ROK)
We can see a possible "diamond formation" developing in Rockwell's daily chart:
Notice in the chart above that Rockwell's stock price swings in a wider and wider pattern between March and the end of June, but has moved in a narrower and narrower pattern since then. That's a diamond formation. Like diamonds themselves, this pattern is rare -- and could be bullish in this case.
Rockwell's trading volume during this pattern has also been pretty active. The On-Balance-Volume line (OBV) is steady and the MACD oscillator looks like it's poised to move higher after a "cover shorts buy signal" this month.
The bottom line: With a rising 200-day moving average line since June, I would look for ROK to break out on the upside. A strong close above $121 (vs. the stock's current $117.50 or so) should do it.
Brunswick Corp. (BC)
Leisure-equipment maker Brunswick's price has been stuck in a neutral or sideways trading range over the past six months, as the stock's daily chart indicates:
However, the stock's OBV line has mirrored the price action -- and both it and Brunswick's price are now pointing upward. The stock's MACD oscillator also just moved above the zero line for an outright buy signal. My signal to jump in would be a rally that takes the stock from around $48.50 today to a close above $52.
Envision Healthcare (EVHC)
This daily chart of EVHC is interesting when we understand what the stock's OBV line has been doing:
First, note that EVHC's price bottomed in February, made a retest in April, rallied until early June and has since drifted down around the earlier lows. By contrast, the stock's OBV line bottomed back in November ahead of Envision's February price low, then rose past where it was during EVHC's June price peak and kept on going until July. The OBV has only declined modestly since then.
I would interpret this as a sign of a developing bottom for the stock, which currently trades at about $22. Even though EVHC's share price is currently below its declining 50- and 200-day moving averages, it should only take a rally to $24 and a strong close there to give the stock's bullishness a "refresh."
Simon Property (SPG)
Shopping-mall REIT Simon Property also has an interesting chart in that it shows the stock's OBV rising over the past two months even as share prices fell:
The combination of a rising OBV line on a stock whose price is declining suggests scale-down buying.
SPG -- which is currently trading at about $209 a share -- might have one more decline towards $205, which is roughly the rising 200-day moving average line's current value. However, I anticipate another upside attempt after that.
This one-year chart of PFNX shows the stock trading in a sideways range:
It would be easier to be bullish on this stock if the OBV line were rising, but a neutral line is OK (although not really bullish). But what's especially clear on this chart is that if PFNX can rally from today's roughly $8.80 a share to a close above $11. That would be an upside break out you would want to follow.