Concord Basing
JP Morgan H&Q rolled out positive
remarks about Concord EFS, but you don’t need an analyst to take note of the
stock. Shares have traded above a rising 200-day moving average for the better
part of a year and now appear to be forming a cup-with-handle pattern.
Concord
EFS.
(
CEFT |
Quote |
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PowerRating) has said it will release earnings prior to Thursday’s market
open and hold a conference call to discuss the results at 11 a.m. ET. The
Memphis, Tenn.-based company provides electronic transaction processing and
funds transfer services.
The stock looks sound on the
technicals: minimum length of five weeks, downward drifting handle on low
volume, strong prior price uptrend with parallel movement in the relative strength
line. I would look askance, though, at the earnings deceleration — from 40%
growth year-over-year growth in fiscal Q2 to 18% growth in Q3. The stock looks
tradable if it clears the high of the handle on strong volume, but I don’t see
the runaway growth characteristics that often accompany the big winner.
We’re still far from seeing the
proliferation of sound base formations and breakouts that would suggest the
market is moving in favor of the medium-term player of high relative strength
stocks.Â
The top field of all charts in this
commentary uses a logarithmic price scale and displays a 50-day price average in
red. In cases where the displayed has traded long enough, the top field also
will exhibit a 200-day moving 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 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.