Find the '08 Leaders That Won't Quit

AutoZone (AZO) eSignal

I normally avoid V-shaped patterns, but you have to be impressed with AutoZone's (AZO) price action since November. The stock dropped to a two-year low at that time and then reversed course, shooting higher and returning to resistance near $140. Accumulation is now leading price, which indicates the stock is getting ready to move higher.

However, I still don't think now is the perfect time to buy the stock. The recovery shows three waves, with the third rally starting just before the holidays. This pattern predicts the uptick will stall at or just above the old highs and then give way to a pullback. I'd rather wait and buy after that selloff shakes out long-side momentum players.

Life Partners (LPHI) eSignal

Let's wrap up this analysis with a potential small-cap winner. Russell 2000 components moved into positive seasonality last month, and this positive vibe will likely stay in force through the first quarter. Life Partners (LPHI) is an investment firm with a market cap of right around $500 million. It rallied to a high at $42.14 in September 2007 and pulled back to a corrective low in March.

The stock then recovered and tested the high in October before selling off once again. It returned to this price level last week, completing a multiyear cup-and-handle breakout pattern. Like other stocks I've examined in today's column, this issue shows highly positive accumulation that supports a breakout and substantial rally in the weeks ahead.

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Alan Farley provides daily stock picks and commentary with his "Daily Swing Trade" newsletter.

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