A few Chinese-oriented names have found a way to get their groove back. For instance, U.S.-listed China Unicom (CHU) has decided to blast off this morning after popping up on my scans yesterday.
First, let's look at why the stock appeared on my scans on Tuesday, and then talk about what do to after a big push higher that the stock has made this morning.
As this daily chart shows, CHU has finally broken its series of lower highs and lower lows after three months:
Yesterday, the bulls confirmed the breakout with a second strong day above resistance. The "W" pattern in price is my one of my favorite set-ups, although I tend to prefer a higher low than what we see on the right side of the chart above. Still, beggars can't be choosers.
The stock's Commodity Channel Index (CCI) has also pushed above 100 for the first time in many months. This usually signifies a change in trend, or a very short but strong push higher. And while neither the Force Index nor the Relative Strength Index (RSI) broke out in front of price, we did get confirmation in terms of volume and momentum, respectively.
Unfortunately, CHU has rallied so much so that I had to rewrite this column after the market opened, and this morning's big push higher has created what I see as a no-chase scenario. So, I'd recommend being patient and looking for a retest of the $13.85-to-$14 area. Buy any bounce off of those levels as long as none of the secondary indicators deteriorate.
I wish CHU had gone up after I posted this column instead of before. But fortunately, I have a back-up chart that we can talk about today: Autohome (ATHM).
This stock hasn't broken out higher yet, but it's coiled nicely to do so within an ascending-triangle pattern:
Note, the yellow boxes in the chart above. This is a stock that likes to consolidate first, then move afterward. But for the first time in quite a while, we're seeing strength in the secondary indicators during the consolidation phase.
The CCI has moved above 100 and has remained there, while the Moving Average Convergence Divergence (MACD) is trending higher and remaining bullish and the RSI is pushing back to test recent highs. The Force Index's move likewise mirrors the CCI.
These are all signs of a bullish consolidation, so I would be buying ATHM on any close over $34.70 -- with the understanding that this is a very-high-risk play. My stop would be $33.30 for half of my stake and $32.50 for the other half. And I would look to size my stake smaller, as I expect volatility.
The upside looks to be around $41, with $37.50 as the first area to scale some profits and trail the stock by either $1.50 or the past few days' lowest low (whichever fits your risk profile better).