Readers responded in force to my
Tuesday column on single-digit stocks. No, they didn't heap praise on my insightful analysis, amusing style or razor-sharp graphics. They all wrote in to get my take on their favorite small stocks. So to Dave, Gabe, Doc N., Craig and Katie, this one's for you.
This random grouping represents an interesting cross-section of this speculative sector. Their picks may all be small, but that's where the similarities end. A couple of these stocks look ready to win best of breed, while others are just ugly mutts. I have to admit, the most beat-up dog in the pack was one of my long-term picks. When I see misfires like this, I try to remember that stock-picking is only an odds game.
Omega Healthcare Investment
is a great-looking stock that keeps popping up on my personal scans. OHI just broke out to a two-year high and may have another 3 points to rally before it hits substantial resistance. This one is definitely a thumbs-up.
( VWKS) has one big problem -- that tall candlestick reversal on May 23. This big spike should not be taken lightly, because it represents strong resistance, in the form of investors who got stuck holding the bag. You can bet they'll be looking to sell the next time VitalWorks rallies toward the high.
Japan Smaller Capitalization Fund
was a nice play on the Asian recovery, but what has it done for you lately? It began a pullback several weeks ago that carried way too far. It has bounced well since finding a short-term low late last week, but it's a long, long way back to that old high. It's likely the stock will show no further gains for the rest of this year.
Can you hear that sound? It's telling you to sell your
( HDWR) shares and move to the sidelines. The stock broke its 50-day moving average on high volume a few weeks ago and has now rallied back to the average. This is a classic time for short-sellers and disgruntled investors to take action. Neither of them will help the bull cause right now.
( CHRD) is a noose around my technical neck. On
March 21 I said, "The odds favor the CHRD bulls in the months ahead." It must have been upside-down bulls, because the stock has gone straight south since that time. Chordiant is back to last year's low and shows little opportunity for bulls or bears right now.
( ITRU) is coming off a two-year base and could make further gains in the months ahead. Intertrust printed a nice little triangle the last three weeks and should head higher soon. The stock should have a tough time getting over $4, but that would be a price double from here.
It looks like the next move is up for
( SWW), but what then? The stock shows substantial resistance just above the current price level. This means it can make progress, but probably at a very slow pace. Since speed of movement is one of the attractions of small stocks, there are much wiser picks for your trading account.
Alan Farley is a professional trader and author of
The Master Swing Trader
. Farley also runs a Web site called
HardRightEdge.com, an online resource for trading education, technical analysis and short-term investment strategies. At the time of publication, Farley did not have any positions in any of the stocks mentioned in this article, although holdings can change at any time. Under no circumstances does the information in this column represent a recommendation to buy or sell stocks. Farley appreciates your feedback and invites you to send it to
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