Opportunities from Three Stocks Extended Nine Days in a Row Higher

Oct 27, 2014: 12:24 PM CST

At the moment, three stocks have traded higher nine days in a row and may be ripe for a pullback.

Let’s highlight these three names from our simple scan and note potential opportunities from these lesser-known names.

We’ll start with Darden Restaurants (DRI):

All stocks will have the same logic but of course be sure to do additional analysis if you’re considering trading these candidates.

Each stock has closed nine consecutive days in a row higher in an impulsive move and logic suggests a pullback or stall is more likely than an extension well beyond 10 consecutive days in a row to the upside.

This is a mean reversion type of aggressive strategy.

The alternate method of trading these stocks would be to wait for the pullback/retracement (not trade short) and then buy shares as the pullback finds support.  This strategy allows you to play into strength but on a pullback.

Darden (DRI) would be cautious/bearish under $51.50 or else “breakout bullish” above it.

Genuine Parts Company (GPC):

Similarly, GPC is uptrending in a stable trend from March to present.

Fortunately, we can see a similar instance of consecutive up-closes that took place in February 2014.

Note the spike in volume and consecutive closes higher from $75.00 to $85 per share.

The result was a choppy pullback that took price to $83.00 per share which was a good spot to trade a “strong stock getting stronger.”

We’re simply seeing another pattern similar to that of February (cautious into $94.00 per share).

Finally, Interpublic Group (IPG):

This stock is different than DRI or GPC because it is trading up into a known resistance level at $18.75.

The logic of a stock trading into a known resistance cluster is similar to the opportunity in Caterpillar (CAT) I highlighted in this morning’s post.

IPG would be bearish/cautious under $18.75 on a likely swing down against this level or else “breakout bullish” above $19.00 per share.

Here’s a bonus opportunity in Yahoo (YHOO) after a stellar rally recently:

Yahoo (YHOO) shares saw similar strength on the rally up from $37.00 per share to the current breakout above the $44.00 level.

Keep your eye on Yahoo for any sign of weakness at the highs – it’s an interesting “Gap and Run” pattern nonetheless.

Follow along with members of the Daily Commentary and Idealized Trades summaries for real-time updates and additional trade planning.

Corey Rosenbloom, CMT
Afraid to Trade.com

Follow Corey on Twitter: http://twitter.com/afraidtotrade

Corey’s book The Complete Trading Course (Wiley Finance) is now available along with the newly released Profiting from the Life Cycle of a Stock Trend presentation (also from Wiley).

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