Hot Shots: The “Ho-Ho-Hopeful” Bull
December 13, 2007
I’ve begun the last couple of weekly column’s with the question of “What’s on tap for Thursday?” Seeing how the broader market has just experienced the ultimate in whipsaw action over the last two sessions and in the process has kept statisticians, bulls, bears and hedge hogs on their technical toes to say the least; it seems a fair enough way to begin today’s foray into the charting tea leaves and our sometimes fickle friend Deltus Moodiness.
“Are we having fun yet?” I guess beginning with those words may have also been appropriate. In truth, depending on a trader’s style, the answer could be an emphatic “MOOyah!” Of course, a tourniquet-ready “BOOyah!” for those overstaying their welcome coupled with promises to break naughty habits, could also be the reality for many. With the volatility witnessed over the last two days, bulls, bears and hedge hogs have all ruled the day at some point, while the greedy have generally been left empty-handed in the best case scenario.
In lieu of the above extraordinary technical circumstances, it might seem that moving ahead with some directional observations on stocks of interest is one sure way to look foolish. That might be further appreciated as the thoughts below are being constructed while lesser “Must See TV” like Criminal Minds temporarily replaces CNBC as the station of choice. With that said, I don’t mind providing a couple of bullish tea leaves via our charts as factors like a Follow-Through Day, 20-week bull phase, a seasonally strong time of year and the ability of many growth stocks setting up technically well are still being given the benefit of the doubt. Of course, the fact this Bovinus Optimus’ opinion on the market is in the minority once more, that’s certainly felt to be good food for thought “mooving” forward as well.
Figure 1: OptionsXpress (OXPS) Ascending Base Breakout
Last week, small capper semiconductor concern Verigy (VRGY) was described as a “VERigY” good bullish situation. A near miss of the 5-Minute formula (28% on 11/28) has ultimately provided the basis for the stock’s handle development of the past two-weeks. Verigy’s “handle” and other proper bases still developing technically-well in other growth names in spite of the pooh-poohing in other financial rags is one reason why this corner remains optimistic than many and most of those more vocal faces on Wall Street. With that said, another stock being monitored and adding confidence to this view, are the daily/weekly tea leaves in OptionsXpress (OXPS).
A couple week’s back, ThinkorSwim (SWIM), a competitor of OptionsXpress was written about favorably. Subsequently, a described handle and Wave 4 EBOT combo from sub $15.25 have been well-rewarded with gains in excess of two-points while headlines of the “R” word and “Dow Downed!” blindside investors. While no guarantees or recommendations can be offered, (you’ll have to ask your broker for that type of affection) looking to the daily chart above and conditions do appear bullish and still poised for further gains in this on-line options savvy broker.
The technical set-up in question is what some growth traders refer to as an ascending base. The pattern generally takes nine or more weeks to develop and needs at least 3 higher highs and higher lows to confirm it. In the case of OXPS, I’ve taken the liberty of skipping one early high to keep the picture a bit more symmetrical. More important, with this being the ninth week of development and other qualifiers in place, the bullish picture looks good. While the formation is less common than the classic cup with handle or flat base, it is considered a consistent achiever within a healthy market when triggered properly. Additionally, looking at the very healthy volume spikes which have occurred on rising prices within OXPS’ ascending base, including the latest breakout volume of the last two sessions; its thought the burden of proof remains on the bears’ shoulders.
Figure 2: Hoku Scientific (HOKU) Volatile Baser
“Ho-ho-Hoku?” Admittedly, there might be some seasonal-based hopeful/wishful thinking when looking at Hoku Scientific (HOKU). Press releases over the last few months trumpeting multi-year contracts potentially worth upwards of a billion dollars with major players, but a company still struggling with profitability, does lend itself to that most giving time of year. With that said, there are other bullish factors which are considered less open to question. First, HOKU is part of the scorching hot alternative energy space (JASO, FSLR, LDK, WFR, SOLF). Additionally, while very volatile, the weekly chart does maintain an overall bullish technical picture for intermediate strategists.
Shown above, my interpretation of that time frame suggests a large and loose “W” base sans the handle (currently). That bullish pattern looks to confirm PS Elliott’s weekly TAPP projection. The most recent daily chart action looks to have HOKU finally attempting some classic downward-sloping price action on lower volume. Given a couple to perhaps a few more sessions of further consolidation and the action could ultimately develop into a handle. The caveat there and possibly opportunity as well, is to keep the annotated Fibonacci levels in mind. Not only might a support-style entry be located, but a price break of 9.68 thereabouts, would kill the confirming pattern offered by this market observer. Ideally and in being appreciative of symmetry, I’d like to see HOKU hold above 10.50 thereabouts to keep the anticipated handle, ship shape. That might be asking a lot of course, but it is a season when sounds of “Ho-Ho-Hoku” might be heard and make believers out of more than a few traders.
Chris Tyler
Staff Writer & Options Strategist
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