Rather than cover the outlook for the broader market – which you can see here on Friday’s BNN appearance — I’d like to cover speculative stock idea. I referenced Valeant in a recent Investors Digest article, and in this blog
While certainly not a stock for the meek, this stock has some interesting technicals behind it at this moment
I’ll refer to the daily chart on this stock today. Here are some basic observations:
- $120 neckline from what appears to be a reversal pattern is being tested. Its not broken yet—but a break would be very bullish. Keep your eyes open for this potential.
- Downtrend line formed over the stocks crash is broken, 50 day MA is broken to the upside – it’s being challenged as I write.
- Moneyflow (top and bottom panes) is improving on the short termed chart
- Comparative relative strength is improving again on this short termed chart
- On the short termed negative: momentum is short termed overbought across the board (stochastics RSI and MACD).
In a nutshell: this stock looks like it will pull back a bit due to its overbought momentum. However, the stock exhibits many of the key elements one would want to see for at least a short termed move. Valeant is not without its fundamental issues, though – so the stock is not for the faint of heart. For an aggressive component of your portfolio, the stock may be suitable if / as / when that $120 neckline is broken.
Keith’s rant
I will post my special yearly “rant” blog on or before Wednesday. This year’s entry promises to raise a few eyebrows. Next week I will return to my regular blog format, as usual.
4 Comments
I think we have hit or are very near a bottom in the Cad dollar vs USD chart looks to be running into long term resistance. And also I think the low in oil is near. May not be the exact bottom but just listen to how many media stories about how terrible this fall in oil prices is how long it will go on ect. Almost every story on BNN is about this fall in oil. This could mark a bottom in oil. WIll it blast back to 80 dollars probably not but I think the low is very near.
Dave – reading your comments over the years ( thank you for your patronage) you seem to have very good contrarian instincts-and its good to see someone thinking alike -I do think we will see a bottom come in for oil soon–probably by February or so – which lines up with the seasonal buy period. My caveat is that it (WTI) must hold $35. If not–it could see $25. So yes, i agree with you here-providing $35 is held—heck, if its not an actual bottom it may just be a trade for an oversold bounce. Also–I agree that the move will be contained to a limited upside.
Hi Keith,
Could I please ask how you interpret situations where there is divergence between Accum/Distr lines the On Balance Volume index. I realize the latter is related to the end of day closes and the former is related close in relation to the intraday range. In Valeant’s case they are showing the same accumulation in stock in the short term, but they diverge sometimes in other stocks ,so I am curious how you interpret this issue.
Thanks,
Chris
Good question Chris–they are very similar. In some cases, OBV can be a bit more accurate–and the recent stronger down move by that indicator may be suggesting something less bullish for the stock than ACUM/DIST does–check this site for some reference to the difference: http://www.investopedia.com/ask/answers/071414/whats-difference-between-balance-volume-obv-and-accumulationdistribution.asp
Thanks for pointing this situation out–I didn’t notice that variation between these indicators on this stock, and its a negative – so good observation by you!