Strength Amid Weakness Part II
Macro news Wednesday proved a boon for
financial stocks. Before the open, the government’s revision of Q3 GDP data
showed that the economy grew at its slowest rate in four years. That raised
hopes that the Fed can begin easing rates sooner rather than later.
GreenPoint Financial
(
GPT |
Quote |
Chart |
News |
PowerRating) moved
ahead 1, or 3.4%, to 30 5/16 on volume of 536,000 shares, an increase of 59%
over average daily trade of 338,000 shares. The New York-based bank holding
company owns The GreenPoint Bank, GreenPoint Mortgage Funding, Inc. and
GreenPoint Credit, LLC.
The stock, close to making a new
52-week high, appears to be forming an ascending base or base on top of a base.
For more on this price structure, see my lesson on ascending
bases.
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 in black with a 50-day moving average in blue for volume.
These two bases are about a short as
can be allowed an still be called bases. Five weeks is my bare minimum.
But otherwise, the stock has a number
of positive technical attributes. Note that the relative strength line, which
measures the stock’s performance vs. the S&P 500, is leading the share price
into new high ground. The stock is on the verge of making a 52-week new
high.Â
Readers of this column and my nightly Following
The Money commentary know that I often use exchange-traded
funds to gauge the relative strength of sectors. The banking industry,
as gauged by the Banking HOLDR
(
RKH |
Quote |
Chart |
News |
PowerRating), appears to be showing strength
relative to the S&P 500.
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,
you’ll find extensive lessons in the Money
Management area of TradingMarkets’ Stocks Education section.
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