When I look at the chart of Action Alerts PLUS holding Energy Transfer Partners (ETP), I think of the time decay of options -- down and down day after day. ETP has been cut in half in the last 12 months, but is that enough to make it attractive?
ETP has made some big declines below the falling 50-day moving average. When a stock gets "too far" below its declining moving average, it can stage a rebound back to the moving average. We see that tendency in August and October for ETP. Maybe it will happen again now? Volume has been heavy this month, as some investors liquidate and others accumulate. Momentum is giving us a positive clue with a bullish divergence -- lower lows in price versus equal lows in momentum. This is not the most bullish category of bullish divergences, but it can work.
In this candlestick chart of ETP, above, we can see eight record lows (red candles) from mid-October. Candles are great at spotting reversals and eight to 10 record lows is a special candlestick pattern. After eight (or nine, or 10) record lows you look for a reversal pattern. This week's candle could be the reversal after eight record lows. Stay tuned.