A Breakout & A Baser
The breakouts are coming, but this
market continues to be dominated by stocks outside the classic growth fold.
Remington Oil and Gas
(
ROIL |
Quote |
Chart |
News |
PowerRating), an
independent energy exploration and production company, jumped 1 1/2 to 15 1/4,
clearing a six-month base on double normal volume. Note the progressive
tightening of the base, the long prior uptrend distinguished by rising price
action above a rising 200-day moving average, and the relative strength line
confirming both the prior trend and the breakout, volatility and volume
contractions just prior to the base breakout. The basing structure is not too
deep — a decline of 24% from pre-correction peak to trough.
Pharmaceutical company Alza
(
AZA |
Quote |
Chart |
News |
PowerRating)
appears to be setting up. Ideally, the stock would put in a handle or platform
here and consolidate before running to new high ground. The stock appears to be
forming a double-bottom
base. The double bottom, or W, pattern has been known to traders for
many decades. The late William Jiler provided a good description of the pattern
in his 1962 book, How
Charts Can Help You in the Stock Market.
The top field of all stock charts in this
commentary uses a logarithmic price scale and displays a 50-day price average in
red. Some charts also show a 200-day price average in black. In the second field, a
blue relative strength line represents the displayed security’s price
performance relative to the S&P 500. The third field displays vertical daily
volume bars in black with a 50-day moving average in blue for volume.
All stocks, of course, are risky. In
any new trade, reduce your risk by limiting your position size and setting a
protective price stop where you will sell your new buy or cover your short in
case the market turns against you. For an introduction to combining price stops
with position sizing, see my lesson,
Risky Business. For further treatment of these and related topics,
you’ll find extensive lessons in the Money
Management area of TradingMarkets’ Stocks Education section.