A Few Base Builders
A few of Tuesday’s news movers
recorded gains on increased volume, still fewer are constructing decent-looking
bases.Â
Coulter Pharmaceutical
(
CLTR |
Quote |
Chart |
News |
PowerRating) and
SmithKline Beecham
(
SBH |
Quote |
Chart |
News |
PowerRating) announced that the Food and Drug Administration has
accepted for filling an application for market approval of Bexxar for the
treatment of relapsed or refractory, low-grade or transformed low-grade B-cell
non-Hodgkin’s lymphoma. If approved, Bexxar would be the first
radioimmunotherapy to be made commercially available.
All charts in this commentary use a
logarithmic scale. Daily charts display 50-day moving averages of price (in red)
and of volume (in blue). Some daily charts may also display a 200-day moving
average (in black).
Shares in Coulter rallied 4 to 39 on
four times its usual trade. The stock did run into selling pressure at the highs
and pulled back to the middle of its daily range, as you can see in the above
daily chart.Â
Shares may also have benefited from
news that a court has upheld a 5 p.m. deadline to end vote-counting from last
week’s disputed presidential election in Florida. That ruling was initially
viewed as a victory for the Bush campaign, but observers later realized the
decision also left open the possibility of counties filing amended returns after
the deadline, an option welcomed by the Gore campaign.
As you can see in the following weekly
chart, Coulter has been basing for more than eight months. In addition to
clearing its 50- and 200-day moving averages, the stock is trading above its mid
level of 34 1/8. As of Monday’s close, Coulter had a 12-month relative strength
score of 94 and a six-month RS score of 96 on TradingMarkets’ StockScanner.
For long trades, I insist that recently
corrected stocks overcome their mid levels and their 50- and 200-day moving
averages. Stocks that correct, then recover above those benchmarks have managed
to chew through a great deal of overhead supply. Overhead supply is the amount of shares in
the hands of shareholders with paper losses. These weak
holders tend to look for exits and sell into rallies, blunting
further share-price progress. You can find a stock’s mid level by
summing the pre-correction high and the post-correction low, then dividing the
result by 2.
Proxim
(
PROX |
Quote |
Chart |
News |
PowerRating) announced a
partnership to build the company’s wireless home networking technology into
iRobot Corp.’s iRobot-LE home robot. Proxim’s technology will allow the robot to
receive commands from any PC within 150 feet that is equipped with Proxim’s
technology. People can use their Internet browser to see and hear remotely
through the iRobot’s integrated audio and video technology and control iRobot’s
appendages directing it to perform chores around the home.
Proxim shares jumped 6 7/64 to 63
15/64 on double normal volume. The stock has pulled ahead of its 50- and 200-day
moving averages as well as its mid level of 58 1/4. But it faces possible
resistance around 68 3/16 to 68 3/4. As of Monday’s close, Proxim had an RS6 of
94 and RS12 of 90 on TradingMarkets’ StockScanner.
Here’s a weekly chart of Proxim.
All stocks 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,
check out the Money
Management area of TradingMarkets’ Stocks Education section.