Pfizer Builds Base
The biggest overnight news obviously
was the Florida secretary of state’s certification of George W. Bush as winner
of the state’s presidential election and thus, with its 25Â electors,
victor in the national race for the White House. I wouldn’t trade this Bush
rally, but it has pointed out a number of base builders.
Among them, Pfizer
(
PFE |
Quote |
Chart |
News |
PowerRating), the
world’s biggest pharmaceutical company. The stock gained 2 9/16 to 44 7/8 on
above-average volume. I still need to see more volume come into the stock.
Pfizer also needs to clear resistance around 46.
I also want to see Pfizer’s relative
strength line overcome its Oct. 12 high (see Point A in the above chart). In my
charts, the RS line compares the displayed stock’s performance against that of
the S&P 500. If you play breakouts for the medium term, the RS line should
lead the stock’s move to new high ground or the two should move into new high
ground at the same time. The RS line should not lag price into new high ground.
I often use exchange-traded
funds to size up the strength of a sector or industry. You can see
obvious strength in the drug stocks as evidenced by the Pharmaceutical HOLDR
(
PPH |
Quote |
Chart |
News |
PowerRating).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 security 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.