By: Zev Spiro
The major market indices staged an impressive rally over the last two and a half weeks. Many individual names that were highlighted broke out with decent follow through last week, such as Sohu.com Inc. (SOHU), SM Energy Company (SM) and Citrix Systems Inc, (CTXS). The Russell 2000 Index is relatively the strongest of the major indexes and displayed leadership last week when it broke out to new three and a half year highs. The other indexes are at, or close, to minor resistance and may need to digest the recent up move and pull back to test support. Below is a chart of four major indexes illustrating short-term support and resistance levels, followed by a low risk trade opportunity in Under Armour, Inc. (UA).
Chart 1: Outlines short-term support and resistance levels for the major market indices.
UA is in a primary uptrend, that began March 2009, off all-time lows of $11.94. On Friday, it broke out of a rectangle (basing) pattern on the daily chart, with confirmation, recording new all-time highs of $74.12. A pull back close to the upper horizontal resistance line of the rectangle pattern (trigger) offers an excellent long entry opportunity with limited risk.
Chart 2: The comparative relative strength of UA versus the S&P 500 Index is also in a primary uptrend. On Friday, a simultaneous breakout occurred in UA and the comparative relative strength of UA versus the S&P 500 Index, adding significance to the breakout.
Chart 3: A rectangle pattern has developed in UA since mid-February. On Friday, a breakout with volume and percentage confirmation occurred. A throw back close to the trigger of $70.50, now support, offers a compelling reward/risk entry opportunity. Entry: buy a pull back close to the upper horizontal resistance line, Target: minimum expected price objective is $79, Protective Stop: confirmed move below $70.50.
Updates:
1) McMoRan Exploration (MMR): Market Letter 3/28/11 – If one is still long, use $17.50 as the support level instead of $18. As mentioned previously, place more emphasis on volume and percentage confirmation then time, because time confirmation has not been a great source of confirmation in the current environment. It seems that many levels are not respected and broken for a couple of days, even though the level is still valid.
2) Fortune Brands Inc. (FO): Market Letter 2/22/11 – Close to triggering. The signal mentioned was a daily close above $63.50.
If you are interested in receiving Zev Spiro’s market letter, please email zevspiro@oripsllc.com subject “T3”
*DISCLOSURE: Long SM, CTXS, MMR. Plans to initiate long position in UA.
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