Chicago Mercantile Exchange (CME) may be on the verge of a fresh rally leg after spending the last four weeks trading out a solid base. The stock is piercing a key overhead trend line this morning, but still has some work to do before its narrow range is broken. In the meantime, the action is taking on a more bullish tone and CME investors should take note.
Back on March 1, CME left behind an ugly spike high. The stock moved past heavy resistance near the 2016/2017 highs that day, but was unable to build on powerful momentum. CME began a steep pullback almost immediately and by mid April, shares were off 10% from the March peak. In late April, the stock was hit with an aggressive post-earnings selling wave but further damage was limited. CME held support near the February/early April lows that day and has continued to do so this month. The solid footing now in place here may soon prove to be a major base.
In the near term, CME investors should consider this A+ rated stock a low-risk buy on weakness. A low risk buy zone is now in place between $117.50 and $115.00. This key area includes trend line support near the upper band and the May lows near the lower band. On the upside, a key hurdle will be the May highs near $119.20. Once past this area, the narrow four-week consolidation will be clearly broken. On the downside, a close back below the 200-day moving average would signal trouble ahead.