Stock Chart Work for Wednesday August 18th – Pennants, Trend Channels, Breakouts and Bounce Backs

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The market had a strong day today on the backs of lower fears of deflation and Wal-Mart Stores Inc. (WMT) upward guidance for their full year sales estimates.  This earnings season has had most stocks beat guidance providing for a July rally and more earnings are still expected.  The bearish moves in the market have come as a result of still poor jobs numbers and economic reports.  For the rest of this week we have a slow economic calendar and if we get by Thursday’s Jobless Claims unscathed there remains some upside room.

One of the past weeks big stories was Russia suspending wheat exports and a rise in agricultural goods prices in general.  Today Potash Corp. (POT), a fertilizer company, turned down a buyout offer from BHP Billiton Ltd. (BHP) after which the market carried the stock higher than the level of the buyout.  This is further evidence things are heating up on the farm.  Archer Daniels Midland Co. (ADM) spiked on the news from last week as they procure, transport, store, process and merchandise various agricultural commodities.  ADM also has formed a Pennant pattern, which is a measuring pattern (for more on how to find Pennants on your own see www.StockTradingCards.com). 

Flags and Pennants are some of my favorite patterns as they work fast and tell you when to get out (measuring).  If ADM trades above $31 it is a buy with a target exit price of $33.50 to $34.  (protective sell stop at $29.74)

Another Pennant Pattern I found was Vertex Pharmaceuticals Inc. (VRTX) which is a buy if it trades above $37.  If this stock trades above $37 it is signaling a move to $41.  (protective sell stop at $35.74)
Autozone Inc. (AZO) was mentioned in this column last week as being a stock in a strong and well defined uptrend channel.  The stock has backed off its upper trend line or reaction line and is now poised to move to new all time highs.  (protective sell stop at $204.48)

Green Mountain Coffee Roasters Inc. (GMCR) has been following an uptrend line since early June.  I checked the P/E on this stock and it is high for a coffee machine maker but long side players love stocks in up trends.  The stock is in the middle of a climbing trend channel so if it dips back to the uptrend line it is a buy.  Keep an eye on it.

Following the strong move by retail today on Wal-Mart’s announcement, JC Penney Inc. (JCP) climbed almost 3%.  JCP is down from $25.48 to below $20 in the last two weeks.  This stock could experience a nice 10% move to the upside if retail remains strong as the stock bounces back up.  (protective sell stop at $19.48)

American Tower Group Corp. (AMT) closed at an all time high today after consolidating in the $44 to $47 area for the last month and a half.  High data demand by mobile users seems to be demanding more towers which sounds good for this company.  Do not be afraid to buy stocks breaking to new highs as it is the stock telling you the company is strong.  (protective sell stop at $46.74)

International Game Technology (IGT) has sold off from over $21 to below $15 since mid May.  Today the stock traded up above the down trend line and follow through higher tomorrow will signal a breaking out stock and it is a buy.  (protective sell stop at $15.24)

Sherwin Williams Co. (SHW) broke out of its downtrend today and looks great for a move higher.  The stock has dropped from $78 to $68 in the last two months and looks poised for a move higher.  (protective sell stop at $68.94)

And last but not least is Microsoft Corp. (MSFT), which looks to be rebounding after a two week sell off.  I have no problems recommending a buy ion this company as there is a looming upgrade cycle in the PC industry and this company has more cash on its books than anyone except the US Treasury (if you think the Treasury actually has money).

These stocks all look good for a move higher but be careful of that Jobless Claims number Thursday morning.  Analysts are looking for a 480K number with a range from 465 to 495.
Remember to always use your protective sell stops on long positions and once you get in the money tighten them.

Tuesday August 17, 2010 - 11:00 p.m.