If you're looking for a great trading idea, you may want to look at a stock's chart as much as you'd look at a company's income statement. Enter Amarin Corporation plc (NASDAQ:AMRN), Toll Brothers Inc. (NYSE:TOL), and U.S. Geothermal Inc. (AMEX:HTM). While all three companies have compelling stories, it's the chart of each company's stock that makes them attractive trading ideas right now.
In one fell swoop, Toll Brothers Inc. shares have hurdled the 100-day moving average line (gray) and the 50-day moving average line (blue). Perhaps it's a little too much, too fast; the big move also left behind a big gap that might need to be closed. But, the TOL bulls have topped their hand. Now all the stock needs to do is go back and brush the 100-day moving average line at $32.41 (which will by default mean the gap is closed) and then renew the bigger uptrend. And, that's likely to happen.
That said, there's an even bigger reason why traders may want to expect more upside from TOL now. That reason is the bar from November 15th, which was not only a perfect doji bar - a reversal clue in itself - but the low for that day also brushed the 200-day moving average line before forming that doji. That's a huge (and long-term) reversal clue. Although Toll Brothers shares are already being forced lower after today's strong open, any good pullback is a great entry point.
Although U.S. Geothermal Inc. hasn't made any meaningful net progress today, it's made some important net progress this week, and better still, built that progress on a foundation that has some longevity. Specifically, HTM popped above the 200-day moving average line on November 20th... the same day we started to see bullish crosses of several key moving average lines. While shares retreated briefly last week, all it took was just one brush of those same key moving average lines to push spark the second move above the 200-day line. This second-wind effort should cement the bigger tidal turn into place.
What changed for HTM (which had been in a bearish funk since early 2011)? In simplest terms, legitimate progress. Although U.S. Geothermal Inc. isn't profitable right now and isn't expected to be profitable in 2013, the company continues to increase its output, and continues to build new projects (and win the funding to do so). Better still, compared to similarly-sized peers, HTM has shown the most consistent growth in the top line as well the most encouraging progress with its bottom line.
Finally, as of yesterday, Amarin Corporation plc shares have quietly walked above all of their key moving averages. That it in itself is encouraging, in that AMRN has been through weeks of consolidation and may have a lot of pent-up bullishness to unload now that it's got a reason to do so. But, what really makes this chart so compelling is the bigger-picture upside that only becomes clear with the weekly chart (below).
In simplest terms, Amarin Corporation plc is no stranger to big, prolonged moves, for better or worse. But, given this week's bullish MACD cross and simultaneous move above key long-term averages, odds are good this near-term rally could end up unfolding like the nice rally seen over the course of the first half of this year.
AMRN is the biotech company that has won FDA approval for Vascepa, which is essentially fish oil, but proven to have clinical benefit.