Stocks to Consider Now: Nucor, Chesapeake Energy, Ultra Petroleum
Strong and technically sound, these companies are poised to pop.
Is the worst over? To answer this question, I hunker down and hit the charts. The technical side allows me to cut through the noise and study just what is moving.
When I did this after yesterday's move I started finding patterns that I haven't seen in a very long time. Not just one or two, but several stocks have broken -- or are attempting to break -- out of multi-year consolidation areas. Typically when this happens, a stock doesn't simply roll back over. Rather, it has a tendency to move in a new trend for months and sometimes years on end.
While others may focus their attention on beaten-down stocks that are due for a pop, I think it's prudent to review, respect and start to redeploy capital into the names that are exhibiting excellent relative strength and superior technical action now. Here's a list of names I'm watching.
Nucor (NUE) has been trending in a 20 point range since the beginning of 2006. Just recently the stock has broken out to the upside above $70, adding a quick $4.00. Most would pass on buying this strength and I don't advocate a reckless chase. However, the technical base that this stock has just left suggests that the longer-term move has just begun and is a stock one can hold with a stop below $65.00 for a very long time.
- Chesapeake Energy (CHK) was the same price in February of this year that it was in October of 2005. The stock had done zip until recently, when it cleared these congestion levels and is off to new highs. The move is strong and suggests the possibility of a major run. I would look to buy a dip with a trailing stop at the 50 day moving average.
- Ultra Petroleum (UPL) has also done nothing since its 2005 highs but recently has broken through the $70.00 congestion level to reach a high of $80.00 before pulling back. While the oil names may be under short term pressure due to a rotation away from commodities, this name looks like a longer-term hold with a stop below $70.00. The base suggests a possible double within the next two years.
There may be some excellent gains in playing the bounce with stocks like Apple (AAPL), Cisco (CSCO) and Google (GOOG), but be sure to consider the longer-term plays that have already cleared congestion and are making new highs while the market is making new lows.
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