The thought with Hansen was that we could see the break of a long-term down trend line at any point here and that the risk to take a shot at that possibility was minor compared to the possible reward. A couple of weeks later, not much has changed there.
In Hudson, the trade is different. The company is increasing its revenues and margins, and the chart shows a wide trading range on a long-term view. In both companies, the downside is limited with the upside potential large.
Hudson is a distributor and declaimer of refrigerants. They also provide proprietary on-site decontamination services for large comfort and process cooling systems. To get a feel for this stock, take a look at the big picture -- the quarterly chart.
Here you can see items of interest. The first are the high volume tops in 2005 and again in 2008. High volume tops that go untested usually require retest at some point. They are like a magnet pulling prices higher. They can't be timed with any accuracy that I am aware of but they do have an influence over time. They say that the stock has traded here before and both can and probably will trade there again.
I pulled the chart back to its beginning to show the all-time highs as well as this large trading range that Hudson has traded in. With an all-time high at $27.50, if this $4.50 floor ever gets broken, then there is the possibility of a much higher push -- but you can't bank on that. What can be considered is a retest of the $3.75 to $4.50 area and given that Hudson currently trades at $1.70 that represents more than a double.
On the weekly chart, Hudson has been retracing after a nice volume push higher at the beginning of this year.
Support is found from $1.40 to $1.50 using the anchor bar from the week of Jan. 11, 2010 and the recent swing point lows. A break back over $1.80 to $1.90 would indicate the stock wants to push back to resistance at the top of this chart. If resistance can be overcome, then the large picture comes into play again. Risk is contained though. That's the nice part about the trade. You can risk $.20 to $.30 while you shoot for a double.
When trading these lower priced, smaller-capitalization stocks, it's okay to roll the dice a bit if you are aware that this is what you are doing. Sure, I try my best to find opportunities that have better-than-average odds of succeeding. Hudson definitely fits that bill in my opinion which is why I own it and bring it to your attention.
Until next week, just keep trading the charts!
At the time of publication, Little owned HDSN and HNSN.
L.A. Little, author, professional trader and money manager, writes daily on
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His background includes degrees in philosophy, computer science, computer information systems and telecommunications. With a trading philosophy centered on capital protection first and the accumulation of consistent gains over time, L.A. espouses a simplistic technical approach to trading the markets that is a throwback to the days of past. With a focus on swing points and the qualification of trends, L.A. provides a breath of fresh air to an otherwise crowded room of derivative indicators with the emphasis on technical minutiae.