Financial Thaw Uncovering Diamonds in the Rough
- Posted by Greg Harmon
- on February 14th, 2011
As the snow melts buried treasures are revealed. The same happens in the market. Emerging from all of the short term trading plays have been a few stocks that are breaking out of very long term ranges. Monday morning I pointed out Timken (Ticker: TKR) and last Wednesday Athenahealth (ticker: ATHN) as two of them (links to the stories are below). But with the Financial Sector only recently thawing and joining the bull run, 4 big name large cap diamonds are emerging that appear ready to start massive long term moves higher.
From the weekly chart above for American Express you can see that it has been in a channel between 36.75 and 49.15 for 16 months after rising off of the March 2009 lows. Some might consider it a bullish flag even. Since October it has been drifting to the top of this range. If it can break this band to the upside then the initial target on a measured move would be 61.55. This is found by adding the width of the channel to the break out level. Beyond that a target to complete the flag pattern would bring it ultimately to 76.60. Be prepared for this as it approached 49.15 again.
The weekly chart for the Bank of New York Mellon paints a similar picture. The stock has been trading in a range between 24 and 32.50 for nearly 2 years. It is now testing the top of that range. As it does so it has some very positive technicals. The Relative Strength Index (RSI) is firmly into bullish territory and the Moving Average Convergence Divergence (MACD) indicator is positive. Also the Simple Moving Averages (SMA’s) are all sloping higher expect for the 200 week SMA, with the 20 week SMA recently crossing the 50 week and 100 week SMA’s moving higher. Get ready for this one now! If it can get over 32.50 then the target on a measured move is 41.00.
The Citigroup chart shows an ascending triangle that has touched each rail 3 times. This pattern and diminishing range has existed for 18 months. As it approaches the top of the triangle again 20, 50 and 100 week SMA’s are turning higher. The RSI has been trending higher since August as well. if it can get through the 5.21 level then the target for the pattern is 7.92, found by adding the range at the wide end of the triangle to the break out level. Set an alarm as this approaches 5.21 again.
The JP Morgan chart shows an 18 month consolidation channel between 35.80 and 48.00 after the rise from the March 2009 lows. This chart has an RSI with a rising trend since November and SMA’s turning higher as it approaches the top rail at 48 again. If it can get through 48 then the initial target on the measured move would be to 60.20.
These are massive moves, all over 25%, and Citigroup potentially over 50%. Even if you are a day trader you cannot ignore this potential for a longer term gain. So step back from the quick buck mentality for a minute and prepare for these diamonds in the rough to start to shine.
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The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.blog comments powered by Disqus
Gregory W. Harmon CMT, CFA, has traded in the Securities markets since 1986. He has held senior positions including Head of Global Trading, Head of Product Development, Head of Strategy and Director of Equity. (More)
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