Momentum Financials Ramping Up
A number of financials with decent
relative strength scores are moving up the right sides of bases, along with some
volume spikes that suggest institutional interest. I can find imperfections in
all of them, but the overall group picture is encouraging.
John Hancock Financial
(
JHF |
Quote |
Chart |
News |
PowerRating),
whose base-building caught my attention earlier
this month, broke out of a crisp, sideways consolidation on double
average volume, but closed back below the high of the base. If I had entered,
I’d certainly stay in unless the stock hit my stop, but one would rather see the
stock close in the upper half of the range and above the top of the base.
Golden West Financial
(
GDW |
Quote |
Chart |
News |
PowerRating) is
working on the second act of a correction-recovery pattern, but the right side
is wedging up on meager volume rather than bolting higher on strong trade, then
pulling back on light trade. Rather than moving with conviction, the stock is
acting complacent, almost cavalier. You want the stock to shake out the weak
holders from time to time on the way back up. You don’t want those shareholders
to start bailing after you enter the trade.
Doral Financial
(
DORL |
Quote |
Chart |
News |
PowerRating) is in the
recovery mode of a four-week zone, but watch out for the V-shaped rebound. These
structures tend to fail if the stock rides straight up the V into new high
ground. Abrupt, steep ascents out of bases tempt the crowd to sell and take
profits. Better for it to digest and chew out some of the weak holders before
sending an entry signal. This stock needs time to consolidate. If it rips to new
highs straight from here, the odds increase of a pullback that would stop you
out.Â
SouthTrust
(
SOTR |
Quote |
Chart |
News |
PowerRating) is a little more than three weeks
into a base. Still too short for the medium-term player, who usually holds out for a six- to seven-week pattern. You short-term traders,
check out check the three-day consolidation pattern and breakout on a 15-minute
bar chart.
Torchmark
(
TMK |
Quote |
Chart |
News |
PowerRating) is working up the
right side of a base.
Remember that all stocks are risky. On any trade, reduce your risk by limiting your position size to a percentage of your total
account and setting inviolable price stops. For an intro to combining stops with
position sizing, check out my lesson, Risky Business.