These four stocks have been trading over the intermediate term in well-defined consolidation patterns and are retesting resistance levels. Each stock closed at or near their highs in Tuesday's session, and the technical indicators suggest they are prepared to break out and move higher.
Cintas (CTAS) provides uniform and cleaning services supplies, and its stock has been trading in a narrow horizontal channel for the past two months. Channel support is located in the $114.00 area and resistance is a zone defined by a previous lower gap range, between the $119.00 and $118.00 area. The stock moved back above its rising 50 day moving average this week and closed in upper candle range in the resistance zone. Moving average convergence/divergence has made a bullish crossover above its center line, and the relative strength index is above its 21 period average and its center line. These indicators reflect positive price and early trend direction. Chaikin money flow crossed into positive territory last month and has trended higher, suggesting the stock is under accumulation. It is a long candidate after further penetration of the resistance zone, using a trailing percentage stop.
Garmin (GRMN) designs and manufactures personal navigation devices, and the direction of the stock price over the past six months has been lower. A large wedge or symmetrical triangle pattern has formed on the daily chart as it has oscillated around a flat 50 day moving average. This year, however, a rounded bottom formed which has tested pattern support and then returned price back to pattern resistance. The vortex indicator, which is designed to identify early shifts in trend direction, has made a bullish crossover, and moving average convergence/divergence made a bullish crossover at the beginning of the month and has moved above its center line. Chaikin money flow reflects strong buying interest and the money flow index, a volume-weighted relative strength measure, is tracking higher and above its center line. The stock is a buy after penetration of the triangle downtrend line, using a trailing percentage stop.
A triangle pattern has also formed on the FedEx (FDX) chart and another strong close has the stock price back up to retest the pattern downtrend line. The stochastics oscillator bounced off its oversold level as triangle support was successfully retested at the beginning of the month, and has since tracked higher with price. Moving average convergence/divergence made a bullish crossover last week and has moved above its center line this week, and the money flow readings suggest the stock is seeing accumulation. A break above the pattern downtrend line signals a long entry, utilizing a position size that accommodates an initial stop under the 50 day moving average.
American Water Works (AWK) provides customers with water and waste water services. The daily chart shows another stock that has been under intermediate term consolidation after pulling back from last year's high. The 50 day average has been taken out and a hammer candle formed in the previous session just below resistance. Moving average convergence/divergence is tracking higher, an indication of positive price momentum, and the aroon indicator has made a bullish crossover, a sign of improving short term trend. Money flow readings are extremely positive and should support a breakout move. The stock is a buy after an upper candle close above the triangle downtrend line, using a trailing percentage stop.