Three Stocks That Should Be On Your Watchlist
Joshua is a member of The Motley Fool Blog Network -- entries represent the personal opinions of our bloggers and are not formally edited.
It was an overall positive day for the stock market indexes as they were able to rally back from a weak open to close near the day's highs. Sadly, some of my new long positions decided to not participate. Therefore, they were sold. That gives me more room to add to potential future longs.
Since the market remains in an overall uptrend and my market direction model continues to be under a full BUY signal, I will continue to focus on the long side. Let's take a look at a few more stocks with strong patterns that could potentially be large winners over the next couple of weeks to months. That is, of course, as long as the market continues in its uptrend. A reminder, however, if the market does reverse lower and starts to throw up a lot of distribution days then these trades will basically be null and void.
One example of how stocks do not always work comes with Colfax (NYSE: CFX) which did very poorly on Monday. This is not what you would expect following such a high volume bounce off the 50 day moving average. However, it is what happened and the intelligent trader knows the best bet on action like this is to just walk away and remove the stock from your watchlist.
Let's take a look at Procera Networks (NASDAQ: PKT), Spirit Airlines (NASDAQ: SAVE), and Hain Celestial Group (NASDAQ: HAIN).
Procera Newtorks retook the 50 day moving average three sessions ago on very strong volume. This move has it now working on the right side of its base-on-base (first base: July-October. second base: December-current) pattern. The strong accumulation on the October to December uptrend followed by the low volume on the December to January pullback is now being met by more accumulation as it works its way toward a breakout to new 52-week highs. If Procera can breakout on strong volume, a new long position would be more than warranted. If the stock falls back into the base following the breakout, the trade would be closed and I will monitor the stock for another possible area to get long this EPS and sales growth powerhouse.
Spirit Airlines (NASDAQ: SAVE) is also setting up in a base-on-base pattern (first base: July-October second base: November-January). This pattern is stronger than Pacera. The accumulation as it builds the right side of the current base is simply massive. Spirit Airline's chart pattern is not as smooth and round as Pacera and therefore it would be better to see the stock consolidate sideways and then breakout of a handle or flat base instead of just zooming higher and busting out to a new 52-week high. If the stock can calm down here and then breakout, Spirit Airlines is definitely a stock I want to be long.
Hain Celestial Group (NASDAQ: HAIN) is breaking out to a new 52-week high on strong volume from a short cup pattern. I am going to take a position in the stock at the open on Tuesday. If the stock works out right away then everything will be fine. If the stock decides to not move higher, then I will have a problem. I expect HAIN to work immediately. If HAIN shows me a loss, I will work quickly to start cutting my losses. A close below the LOD (37.17) would officially end the trade.
All of these stocks have very strong fundamentals. The fundamentals I speak of include strong EPS and sales growth, a high return-on-equity, strong profit margins, mutual fund ownership, strong cash flow, and low debt to shareholder equity. These fundamentals are the driving force that should allow these stocks to produce significant gains if the market continues to trend higher.
A final note, nothing is ever for sure in the stock market. If someone tells you they know for a fact that a certain stock will do this or that in the next day, week, or month, run for the hills. Nobody and I mean nobody can predict the future of the stock market. Experienced investors know this is a sign of someone that does not make a living trading stocks or someone that will eventually blow his account up due to the arrogance of actually believing that the future can be gamed. It can't. The only thing you can game in regards to the future is how you will respond to any possible event. Once you are prepared for the possibility of anything happening, especially the unexpected, only then can you take your game to the next level where great traders reside.
The Motley Fool has no positions in the stocks mentioned above. BigWaveTrading has long positions in CFX and HAIN. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.
