While most stocks have made gains in recent weeks, not all of them are positioned to continue rising in the foreseeable future. On the other hand, not all of them
deserve to make more gains either. Wet Seal Inc. (WTSLA), Kite Realty Group Trust (KRG), and NCI Building Systems Inc. (NCS) are three of the fairly rare stocks right now with compelling technical analysis charts
in addition to a positive fundamental outlook.
Though same-store sales were down more than 11% for
Wet Seal Inc. (
WTSLA) in June, that hasn't prevented the stock from gaining 18% over the prior three weeks. Perhaps the market continues to focus on the 24 cent per share profit the company's on track to generate this year... something most
other teen-retailers
haven't been able to do.
Wet Seal shares crossed back above their 50 day moving average line today, which has been a decent entry trigger in recent months even when the market was struggling. Now with a market recovery
as well as an economic recovery taking hold, the 50 day signal could gain even more traction.
Wet Seal's forward-looking P/E of 10.5 is not only low, but plausible; the analyst estimates have been pretty much on target in recent quarters.
Kite Realty Group Trust (
KRG) shares, for the first time in years, managed to make higher lows when forced lower in March and June. It's a subtle paradigm shift for the REIT, but an important one.
What we have not yet seen is higher highs, but recovery efforts have to crawl before they can walk.
On that note, the technical buy rating is being issued now rather than later, since the bullish trigger -
a cross above the resistance at the 100 day moving average line - could start a rally in too much of a hurry to profitably chase. KRG has been toying with the 100 day line for a while now.
Kite is one of the market's better run REITs, having never posted a quarterly loss during the recession. Analysts are expecting operating EPS of 59 this year, and 53 cents next year. If the 53 cent figure is on target for 2010, the forward-looking P/E is a mere 5.9, in which case the stock's recent revival is justified.
NCI Building Systems Inc. (
NCS) is much like Kite Realty in that it's been toying with a breakout above the 100 day line for a while. Given what we know about the chart, however (it stopped giving up ground over the last six months) the buy alarm is being sounded early for NCS as well.
NCI Building Systems is a bit of a real estate and construction recovery play, though a solid trade even without a decisive recovery. The company manufactures metal products not for houses, but for commercial buildings of all sizes. Though investors hear less about it (as opposed to housing),
that market's lull is bottoming too.
Though not profitable for the last twelve months, analysts believe NCI Building Systems will earn 29 cents in the quarter ending in October....which would be a significant change of fortune. Next year's expected EPS of 50 cents translates into a projected P/E of 6.7 - more than enough to fuel this new bullish trend.
