Wednesday, January 25, 2012

Active Screening: Apple Leads

It has been a couple of months since the results of this screen were last looked at, but a fresh run of the screen has seen very little change in the top ranked stocks (as ranked by Market Cap).

The stock screen used the following parameters:

• % Chg EPS; Q to last yr Q of 25% or more
• % Chg EPS; YTD to last YTD of 25% or more
• % Chg Revenue; YTD to last YTD of 25% or more
• Return on Average Equity of 17% or more
• 5-yr Revenue Growth Rate of 15% or more
• Market Cap of at least $50M
• Net Profit Margin of 18% or More
• Current price above $12
• Average 10-day volume above 250,000 shares

Apple's stellar quarter is likely to keep the stock in the no.1 spot for many more months to follow. It has been almost a year since this screen was first run and Apple still holds top spot. The stock was toying with its 200-day MA back in November, a situation which had previously offered great buying opportunities and it proved to be no exception once again.  The stock did briefly toil at its 50-day MA, but the stock didn't look back once it was able to put some distance from it. New buyers need to be looking to $420 support an area to hold on any retracement. This price should factor into any risk:reward calculation; the reward been a projected measured move target of $480. A Zignals Alert will help you track these two key price levels.

Zignals Chart Image

While Rio Tinto held second spot it had the dubious distinction of trading in a downtrend and was on course to test $40 support.  Since November it has been able to break upwards from the channel without making it back to $40; it currently lies just a couple of dollars shy of its 200-day MA at $60.  The next few weeks could see supply at the 200-day MA become more of an issue, although any retracement off its 200-day MA should find support at $58 (i.e. at its current price).  Given that, $58 is probably a good value price assuming the above plays out; stops go on a loss of the 50-day MA.

Zignals Chart Image

Another mining stocks occupies third spot. Barrick Gold (ABX) has been range bound since the latter part of 2010. This situation hasn't changed since last November, although the Accumulation Swing Index is favouring a bearish break of $43. Not helping is how converged 50-day and 200-day MAs are playing out as resistance. Value buyers may look to this as an aggressive entry opportunity, although stops would not be far below $43.

Zignals Chart Image

Fourth is still Baidu (BIDU). Back in November it had failed to hold an upside break of its 200-day MA, instead tumbling below both 200-day MA and its 50-day MA to leave it on a course to test $102.50.  It was able to gain some upward momentum from the broader market 'Santa rally', but it still had problems holding its 50-day MA. However, resistance connecting the swing highs from August looks to be more pressing. A break above this line should be enough to see a push above the 200-day MA too. Stops can go on a loss of the December swing low at $110.  The first target is $145.

Zignals Chart Image

Las Vegas Sands (LVS) has enjoyed a steady rally from the December swing low, but it has yet to test $50 resistance. A negative view on its Macau operations might crimp any drive past psychological $50, but there is little suggest in the chart that the market is dumping the stock.

Zignals Chart Image

Priceline (PCLN) was starting to show an ugly side back in November as it failed to break from a gently falling consolidation, and was soon followed by a 'Death Cross' between its 50-day and 200-day MAs. The stock eventually made it back to $450 where it was able to attract enough demand to see it hold this support level. Since then, the stock rallied to $525 where it has spent the past week shaping a small 'bull flag'.  The typical response from this pattern is a continuation of the upward trend with a measured target around $600; stops go on a loss of $510. Long term trend watches will consider Priceline range bound between $450 and $550 and may not be inclined to get involved until $550 breaks. If, on such a break of $550 volume expands, a revised upward target of $650 can be used.

Zignals Chart Image

HDFC Banks (HDB) was the only financial services stock to make the top 8 picks. In November the stock was struggling after it lost $28 support and was encountering resistance at its 50-day MA, but since then the stock has managed to clear a number of resistance points and trades at $31. The fact the stock has not only recovered from the significant loss of $28, but a declining channel connecting swing highs from last July, means shorts will be under pressure to cover (if they haven't already).  This demand will encourage additional funds in from the sidelines in the form of fresh buyers. TheStreet had downgraded the stock in mid-January to little effect on price action.

Zignals Chart Image

A third mining stock, Anglogold Ashanti (AU), occupies seventh spot. This stock has struggled to re-establish the 2010 bull trend, drifting from $52s highs to the current mid-$40s. Support can be found at $39 and the start of the 2010 trend at $35, but with both 50-day MA and 200-day MAs heading lower it's hard to see when this will break out of its funk. Bulls can look to sharply improving fundamentals, besting FY2010 performance, as an eventual trigger for a new upward trend.

Zignals Chart Image

The only new stock to make the grade was Continental Resources (CLR). This American oil and gas exploration company is not only enjoying solid earnings growth, but is one of the few qualifying stocks also enjoying a solid bullish trend. The stock is trading above (and successfully tested) $72 support. The break of $72 sets up a possible measured move target of $96 (risk is assessed using a stop below $72). The current rally was started from $46 in October and generated a 'Golden Cross' between the 50-day and 200-day MAs in December as it was trading around $62.

Zignals Chart Image
Remember, you can use Zignals Alerts to track when prices are triggered for any of the aforementioned stocks, or stocks you own or are interersted in.


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