Though the broad market remains under attack now that investors have figured out it's overbought, a small number of stocks look like they're itching to break out despite the bearish tide. Those names are Reliance Steel & Aluminum Co. (RS), Chimera Investment Corp. (CIM), Gerdau AmeriSteel Corp. (GNA), and Exelixis, Inc. (EXEL). Let's take a closer look at a chart of each.
Gerdau AmeriSteel Corp. (
GNA) has already knocked out the first wall at $7.30. The reaming one is at $7.78, where the stock topped in June. GNA came close to breaking past that level in late July, and over the last two weeks has made its best effort yet.
Of course, today's high of $7.70 -
and the subsequent pullback to $7.44 - isn't going to the job done for Gerdau AmeriSteel shares. This is an idea that really merits waiting for a clean, verified move above the ceiling, and then jumping on board.
The shape of the chart does suggest the odds of GNA breaking out are good though. Since May we've seen a wedge develop, forcing Gerdau AmeriSteel to make higher lows while the assault on horizontal resistance continued. And, the March low set up what has become something of a cup-and-handle(esque) pattern.
Should the breakout take root, a target of $19.00 isn't out of the question. That's where GNA was trading in the middle of last year.
Exelixis, Inc. (
EXEL) almost made our list of
biotech breakouts posted yesterday (
and probably should have been listed). The omission is being corrected today.
Having been range-bound between $4.15 and $6.12 since November of last year, investors were starting to lose patience with EXEL. Exelixis changed its demeanor last month though, by knocking on the upper edge of that range twice now. Though the $6.12 are still hasn't been hurdled on a permanent basis, today's high of $6.19 (with only a modest pullback) suggests investors aren't looking to bail out at that mark any longer.
As for a target, the last meaningful ceiling we saw for Exelixis was the 2007 plateau around $11.75. That's quite a move, but EXEL has two things going for it... losses are shrinking, and the Motley Fool is now behind it; its investor army may be in tow.
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Gerdau AmeriSteel isn't the only steel and fabrication stock of interest today.
Reliance Steel & Aluminum Co. (
RS) is also perking up to the point of being trade-worthy.
In the short run, Reliance Steel & Aluminum shares don't look like anything all that great. They're still range-bound between $33.50 and $40.00, and haven't even come close to rivaling June's high of almost $44.00.
Yet, RS shares have broken above a minor resistance line following that peak, and we have seen higher lows since the last time $33.50 was encountered. It's not everything, but it could be the beginning of something.
A break above $40.00 should convince any would-be RS owners that the stock is rolling, though speculators may be ok with tiptoeing into Reliance Steel & Aluminum Co. shares at their current levels.
And finally,
Chimera Investment Corp. (
CIM) is topping our breakout candidate list, though we'll warn you now.... this may be the last explosive 'breakout' ever.
Chimera Investment Corp. is technically a property management company, though we'll put in the same boat -
for better or worse - with REITs. That said, newsletter subscribers may recall our stance on REITs from our most recent publication... though still on shaky ground,
REITS were excessively beaten up during the recession, and as such present bargains now. The same is true of Chimera Investment Corp.
The reason CIM looks so compelling right now is that it's been persistently knocking at resistance around $4.00. Simultaneously, we've seen higher lows being made. Though the buying volume is lightening a bit, Chimera Investment shares have stayed in the proverbial hunt for a breakout opportunity.
The forward-looking P/E for Chimera is 7.0. That's obviously a big 'if', but that kind of success would really draw a breakout move. Moreover, it would really change the risk-versus-reward scenario -
at these prices - in favor of CIM shares.
If you'd like to know when or if we issue trading alerts specifically for RS, CIM, EXEL, and GNA, then be sure to subscribe to our free e-newsletter. It's delivered two to three times per week.
