Top Swing Trade Ideas for Monday, August 4: DigitalGlobe, SodaStream, More

NEW YORK (TheStreet) -- Good day traders!

Today's top swing trade picks are DigitalGlobe (DGI), SodaStream (SODA) and WageWorks (WAGE).

1. First, let's look at DigitalGlobe, which provides imagery and imagery information products and services in the U.S. and internationally.

DigitalGlobe traded up a big 11.55% on Friday, closing at $29.17 per share.

  • Friday's range: $27.63 - $29.84
  • 52-week range: $26.02 - $43.13
  • Friday's volume: 1,940,714
  • 3-month average volume: 615,523

DigitalGlobe looks good technically, as it is forming a rounded-bottom breakout. DigitalGlobe reported positive earnings last Thursday, and traded up a whopping 11.55% on Friday. The price action gapped up and traded over the 50-day simple moving average, clearing the last month's trading range. Plus, Friday's volume was three times the average trading volume, which tells us that there is bullish sentiment behind the 11% move.

Typically, when a stock trades up 11% in one day, there will likely be a pullback or consolidation for a few days. So I would look to enter this trade on a pullback above the 50-day simple moving average, at $28.86. I'd set a stop at about $28.68, which should be a support level. My ultimate target would be the 200-day simple moving average, which is at $33.57, and is 15% to the upside from Friday's close.

Stay long until you see a sell signal or a close below the t-line.

2. Now let's look at SodaStream, which develops, manufactures and markets home beverage carbonation systems and related products.

SodaStream traded positive on Friday, closing up 3.18% to $34.05 per share.

  • Friday's range: $32.85 - $34.33
  • 52-week range: $28.65 - $69.78
  • Friday's volume: 1,424,258
  • 3-month average volume: 1,186,430

SodaStream is also a rounded-bottom breakout chart pattern. SodaStream reported positive earnings last week and gapped up, followed by a few days of buying pressure. On Friday, price action closed over the 50-day simple moving average by 6 cents, so we'll need a little confirmation today to assure us that the bullish trend is here to stay. SodaStream has attempted rounded-bottom breakouts in the near past, but has failed several times. So let's watch this trade closely and keep our stops tight.

I would like an entry above the 50-day simple moving average, which is at $33.99. Today's trading may open below the 50-day simple moving average, so I'd wait for confirmed bullish strength to enter this trade, and ideally, another close above the 50-day simple moving average. After entering above the 50-day SMA, I would set my stop just below the 50-day SMA, say at $33.84. As with all rounded-bottom breakouts, I target the 200-day simple moving average. The 200-day SMA is at $43.15, and is almost 27% to the upside from Friday's close.

There is some resistance at $36.90 and again at around $40, so watch for a pullback or consolidation at these levels, and look to add the position once these levels are cleared.

Stay long until you see a sell signal or a close below the t-line.

 

3. Lastly, let's look at WageWorks, which provides consumer-directed benefits programs to employees to provide benefits and save money on taxes in the U.S.

WageWorks traded up a huge 11.02% on Friday to $46.34 per share.

  • Friday's range: $42.59 - $46.45
  • 52-week range: $32.88 - $68.31
  • Friday's volume: 718,499
  • 3-month average volume: 376,598

WageWorks is another rounded-bottom breakout, and they are reporting earnings today after the market closes. On Friday, shares traded up over 11%, and the candlestick engulfed the major moving averages. In June and July, WageWorks pulled back 20% and formed a double bottom at around $40. Then, the stock traded off that bottom, regaining around 13% of that pullback. Today, price action will likely pull back a bit, and hopefully it will pull back to the 50-day simple moving average. That would offer us a better entry on the way up.

The last time WageWorks formed a rounded bottom breakout, price action moved about 13% to the upside in a few days, so I'd like to catch that move again.

I would look to enter somewhere between $44.35 and $46.35. I'd set a stop at about $43.78, which is the 34-day exponential moving average. I would target the 200-day simple moving average, at $52.30, 12% to the upside from Friday's close. There is resistance at about $50, so watch for a sell signal at this level.

Good luck traders!

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At the time of publication, the author held no positions in any of the stocks mentioned, although positions may change at any time.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.


TheStreet Ratings team rates WAGEWORKS INC as a Hold with a ratings score of C-. TheStreet Ratings Team has this to say about their recommendation:

"We rate WAGEWORKS INC (WAGE) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its impressive record of earnings per share growth, compelling growth in net income and revenue growth. However, as a counter to these strengths, we also find weaknesses including premium valuation and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • WAGEWORKS INC has improved earnings per share by 28.6% in the most recent quarter compared to the same quarter a year ago. The company has demonstrated a pattern of positive earnings per share growth over the past year. We feel that this trend should continue. This trend suggests that the performance of the business is improving. During the past fiscal year, WAGEWORKS INC increased its bottom line by earning $0.62 versus $0.36 in the prior year. This year, the market expects an improvement in earnings ($0.87 versus $0.62).
  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Professional Services industry. The net income increased by 39.0% when compared to the same quarter one year prior, rising from $4.64 million to $6.44 million.
  • Looking at where the stock is today compared to one year ago, we find that it is not only higher, but it has also clearly outperformed the rise in the S&P 500 over the same period. Although other factors naturally played a role, the company's strong earnings growth was key. Looking ahead, the stock's rise over the last year has already helped drive it to a level which is relatively expensive compared to the rest of its industry, implying reduced upside potential.
  • Net operating cash flow has significantly decreased to -$10.80 million or 303.37% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.

Aaron Burt is based out of Sonoma County California, and is a contributor for hitandruncandlesticks.com. He focuses on short-to-intermediate term trades using candlestick analysis as his baseline for his trade ideas. He is a ghostwriter for candlestick analysts. He trades daily and analyzes charts daily. He trades charts, not news; news is subjective, but charts are factual. Follow him on Twitter @aarongallaher.

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