Ultra Trending Bullish Stocks

By Zak Mir

I suppose it can be said that the stock market is divided between those who are bottom fishers/bargain hunters and enjoy catching falling knives, and those who wish to go with the trend. The problem of course with the latter strategy is that all too often by the time you have spotted a trend it seems to peter out. While there is also the issue of buying a stock at the “lows” only for it to head lower, it would appear that most investors prefer to ride out such episodes. Clearly, buy low, sell high is a natural way to go for most of us.

Indeed, it is difficult to argue against such a convention, especially if you are fundamentals driven. But from the perspective of a technical analyst the idea of buying high, sell higher is not as counterintuitive as you might expect. For instance, by definition, the biggest winning stocks and markets will go up, stay up, and extend their gains. On this theme it may be that the best example that comes to mind for most of us are giant U.S. tech plays such as Apple (AAPL) and Facebook (FB). The purpose of this article though, is to underline that it is not just companies on the other side of the Atlantic which necessarily offer the easiest ride to the bulls.

I am starting off with Evraz (EVR) which may strictly speaking be described as a recovery situation, given the rebound visible on the daily chart since March last year from below 60p. The reason that this is now classed as a momentum play, over and above the way that there has already been a massive move to the upside is related to the continuation signal seen here in December. This was not only a December bear trap rebound from below the former October support, but also a higher low above the 200 day moving average then below 110p. The general rule when a stock or market finds support or is too strong to touch the 200 day line on a test, is to regard it as being in ultra bullish mode. On this basis the target here is seen as being as great as the March 2014 price channel top at 250p over the next 1-2 months. This destination is valid while there is no end of day close back below last year’s price channel/20 day moving average – the suggested money management point.

What is attractive about the ongoing charting position at Intu Properties (INTU) is that even though the stock is at the highs of the recent past, we are still looking at an incredibly robust picture. This is said in the wake of last month’s double unfilled gaps to the upside through 350p leading into an extended bull flag out of which we are now on alert for a decent breakout. Ideally, there would now not be any end of day close back below the floor of the flag/20 day moving average at 367p ahead of a fresh push towards the one year price channel top at 400p. This should in theory be the “minimum” upside target given how strong the January breakout was, and considering that the RSI at 65 is still off the most overbought levels even after all the gains we have seen of late.