Aug 27, 2010 10:04 AM PDT
Take Intersil Corp. (ISIL) for instance. The stock's been going strong since December, hitting a low of $7.18 then, and proceeding right up to the current price of $15.23. That's a 112% gain for those of you keeping score at home.... which could intimidate even the most fearless of traders mulling an entry now.
However, the size of the gain isn't even what should be intimidating potential Intersil investors. The fact that ISIL is bumping up into the first of its key Fibonacci (it sounds scarier than it is) hurdles. The 38.2% retracement of the May '08 high and December low is pegged at $15.86 - right where the stock is dancing now.
Based on the strength of the rally, persistent volume, and the fact that Intersil shares were so beaten up last year, we view ISIL as a prime breakout - or continued breakout - candidate. However, it will need to get and stay above $15.86 or so to really merit the next wave of buying.
Foreign regional bank Popular Inc. (BPOP) can be described in only one way - disastrous. After peaking at $29 in 2004, it's been nothing but downhill; the stock lost a lot of ground every year since then, and currently trades around $2.00. So why, pray tell, is BPOP on our potential breakout list? It's not even really broken out in the short run or the long run. The reason is, there's something different this time..... volume. There was an explosion of buying volume a couple of weeks ago, and that may be an omen that things, well, that things can't get any worse for Popular Inc. (Hey, it may not be a great reason, but a rising stock is a rising stock.)
There's still a lot of resistance BPOP will be facing if this new wave of bullishness does indeed take hold, like the falling resistance lines currently at $5 and $8 (though they're falling every day). This is the stock's best move in years though, and worth monitoring. And, it may be worth a little speculation in the meantime.
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Emulex Corp. (ELX) is another stock that was going great, and then was cold, and then warmed up again; the cold patch may have been caused by resistance at its first major Fibonacci line.
Emulex shares are no stranger to volatility. They've never not been. Over the last few months though, at leads that volatility has been helpful to ELX. We saw an overnight jump from the $5 area to $10 in April, and then an equally-fast tumble from $10 to $7 in July. But hey, at least it wasn't back to $5 again. More importantly, ELX has started to creep higher again.
We feel Emulex will indeed continue to recover, though at this point it may not be a bad idea to wait for the mid-$11 area to be surpassed before piling in. Traders who are already in, however, could reasonably view the ELX tide as being in their favor now.
And finally, Blockbuster Inc. (BBI) has made our breakout list for an oldie-but-goodie reason... a classic cross above the all-important 200 day moving average line (yes, people still use that antique of an indicator).
To be clear, Blockbuster Inc. shares are nothing a trader would want to plow into exactly at this moment. The stock blasted well past the 200 day line with a move from $0.91 to $1.20 on Wednesday, and a 31% move in one day is a tough act to follow no matter what the circumstances are. BBI is not exception. In fact, it looks like shares are being reeled in a little today; it wouldn't be out of line to wait for the stock to slide all the way back to the 200 average at $0.93 before stepping in.
Either way, the damage has already been done (in a good way) on the BBI chart. Now that the 200 day line has been hurdled, it will be much easier for Blockbuster shares to get going.
If you'd like to know when or if we issue trading alerts specifically for BBI, ISIL, ELX, and BPOP, then be sure to subscribe to our free e-newsletter. It's delivered two to three times per week.
