This column originally appeared on Real Money Pro at 8:45 a.m. EST.
Let's look at some reader requests.
- Apple (AAPL)
- Intel (INTC)
- Cisco (CSCO)
- Universal Display (PANL)
- Dollar General (DG)
Each day, I'm featuring several reader requests for the current technical take on a stock. I can't assure you that I'll get to yours, but I will certainly make every attempt to do so, as long as the stock meets the following criteria.
1. The average daily trading volume needs to exceed 250,000 shares. If a stock trades too thinly, chart analysis doesn't help much, because there just are not that many traders involved. One big buy or sell order can move the stock in ways that chart analysis just cannot predict. So let's stay above 250,000 daily shares.
2. The stock really needs to be trading above $5. Sub-$5 stocks don't get the same treatment by institutions and portfolio managers. Also, many traders set their trading screens to ignore stocks below $5 just to cut down on their trading candidates. While I'm sure your favorite penny stock is the next undiscovered gem, I'm not in the business of breaking news stories ... so once your gem is discovered, let me know, and I'll take a look at the chart.
3. Make sure you check my recent "3 Stocks I Saw on TV" videos. I don't want to be too redundant, so if I've recently covered a stock in video format, I won't repeat it here.
Hopefully, you've noticed that I alternate between daily and weekly bars in the charts. It's important to understand the underlying rationale for choosing one time frame over another. I differentiate between these time frames in pretty simple terms.
The longer time frame -- the weekly bar chart -- is my "decision" time frame. I want to remain in phase with the trend, and I use the weekly bar chart to identify the trend. So I'll feature a weekly chart when I want to emphasize a certain aspect of the prevailing trend -- not a specific buy or sell point. This weekly chart is the time frame in which I make my decision: Do I want to buy or sell the stock?
The daily chart is my "action" time frame. Once a decision is made on the basis of the weekly time frame, then we zoom in on the daily chart to choose that level at which action is taken. The daily time frame is my preferred frame of reference for actually implementing the decisions I've made on the weekly chart.
In your own analysis, make sure you are using different time frames for different things; otherwise your actions will largely be a function of your emotions.
Apple continues to do what it has been doing for the past few months. After a big rally, the stock corrects to the bottom of an existing channel ... and then bounces. Look, this stock has not been acting well, and it has been right to be out of the stock. It is fine to say, "Well, I can take the pain," but trading should not be a test of manhood. When I hear "If you want to own this stock, you'll have to take some pain", I think, "Um, I think I'll stand aside for now and then buy when holding is a pleasure, not a pain."
That's where we are with AAPL. I'd use $378 as a reference for stops. So long as AAPL holds above that level, the channel is intact. Stay long and enjoy the move.
Intel is another large cap tech stock that's acting well. Actually, it's been acting well for a while, nearly tripling in price since the early September low. These last few weeks of consolidation have been all that was required before another move higher. Yesterday's breakout was on higher than average volume. That's bullish. This uptrend remains intact unless the stock falls beneath prior support at around $24.
Cisco is yet another large-cap tech stock that's rewarding the bears. The chart looks a bit like that of INTC, with a recent breakout above a consolidation triangle of higher lows and lower highs. Notice how volume has been declining over the past few days. That's a yellow flag and often leads to a pullback. Any pullback to around $18.50 is buyable.
Universal Display ran 5% yesterday, closing at the highest level since late September. This double bottom highlighted in the daily chart above marks the bottom of the channel at $40. With PANL now working toward the September high, this breakout remains intact unless the stock falls below $50.
Dollar General has done pretty well since the August low and is currently consolidating in a $1 range. This tight range sets up the stock for more upside. But if you are long, take note of support at $39. That's right where the 50-day moving average is resting now, so any break below that level puts the uptrend in doubt.
Be careful out there.