The market is on the move, continuing its rally off the February lows and making new highs. Here are four potential breakout stocks with clearly defined resistance levels and positive price momentum and money flow indications, positioned to take advantage of the upward inertia.
Shares of the generic drug manufacturer, Catalent (CTLT) - Get Catalent Inc Report rallied off their February low only to pull back sharply in April and retrace nearly all of their previous gain. They held their June lows, forming a double bottom and were able to begin an advance on resistance in the $24 area, which is also the current position of the 50-day moving average.
The recent basing process has given the momentum indicators time to reset, and the relative strength index and moving average convergence/divergence are tracking higher and are at or over their center lines. The vortex indicator, which is designed to identify early shifts in trend, has made a bullish crossover, suggesting that the stock is in the early stages of a new uptrend. Money flow readings support the momentum thesis. Accumulation/distribution has crossed above its 21-period signal average, and Chaikin money flow has crossed into positive territory.
The stock is a buy at its current level using a trailing percentage stop.
Shares of Dermira (DERM) - Get Dermira Inc Report , which investigates therapies for patients with skin diseases, have been rising in a series of higher highs and higher lows above a strong uptrend line since March. They are currently consolidating in a rudimentary inverse head and shoulders continuation pattern, with neckline resistance in the $31 area. The price momentum indications are flat, which would be expected during periods of consolidation, but the volume-weighted money flow index and Chaikin money flow have crossed above their center lines.
The stock saw a nearly 3% gain in Monday's session, closing near its highs and above neckline resistance, making it a long candidate, again, using a trailing percentage stop.
China-based online retailer, JD.com (JD) - Get JD.com, Inc. (JD) Report had been making a series of lower highs above horizontal support in the $22 area, then moved below that support last month but holding at the $20 level. It has been attempting to base and recapture former support-turned-resistance, which is currently being reinforced by the 50-day moving average.
Moving average convergence/divergence made a bullish crossover during this period, and the relative strength index has crossed above its center line. The money flow index is tracking higher and above its center line, and Chaikin money flow is attempting to hold in positive territory.
The stock is a long candidate after another close in upper candle range above the $22 level, using a close trailing percentage stop.
Ophthotech (OPHT) - Get IVERIC bio, Inc. Report is a clinical stage biotechnology company that develops therapies for diseases of the eye. The stock broke out of a four-month channel base last month, moved up to the 50% retracement level of this year's early range, then successfully retested former resistance and is now back to the $59.50 retracement level. Moving average convergence/divergence and the vortex indicator have both made bullish crossovers and the relative strength index is above its center line. Money flow readings are also positive, and the stock looks like it is ready to take out resistance and begin a second phase of its base breakout rally.
Ophthotech is a buy after an upper candle close above $59.50, using a trailing percentage stop.
This article is commentary by an independent contributor. At the time of publication, the author is long DERM.