Stocks Ignoring The Selling

By Joey Fundora | November 30, 2011 AAA

The recent volatility in the markets has certainly made an impact on a vast number of stocks. Whereas just a few weeks ago, over 80% of stocks were trading over their 40-day moving averages, the number has dwindled in the low 30s. Certainly, the weakness has spread fairly quickly, and the markets are still very vulnerable to further downside. However, the markets are oversold, and it's possible that they can muster a rally attempt to close out the year. There are still some stocks that have held up and could be worth considering in the event the general markets can stabilize.
Macy's Inc. (NYSE:M) for instance, has held up through the recent market turmoil and remains in a tight consolidation above a key level near $30. Overall, the chart pattern resembles a cup and handle with the right side of the base already being well developed. The $32 area is where traders should focus, as any close above this level could spark a continuation rally.

Another stock working on the right side of its base is MercadoLibre, Inc. (Nasdaq:MELI). It may not be a textbook base, but MELI grinded out a bottom after a several-month-long correction in the autumn, and recently exploded higher. It has been flagging since the breakout after approaching $90. Any breakout above the flag could lead to an assault on its all-time highs near $93.

Oncothyreon, Inc. (Nasdaq:ONTY) may not be as well developed as Macy's or MercadoLibre.com, but it has been working on a solid base since correcting in August. It has clearly established the $6 level as support and could make a breakout attempt over $8 soon. It has been trading in a very tight range the past few days and could be worth watching on strength that carries it near $8.

Cabot Oil & Gas Corporation (NYSE:COG), on the other hand, already cleared its base and is in the midst of the first pullback after the breakout. It cleared the $79 level in late October and its momentum carried it to $90 per share. It came back pretty quickly and did find support near $75. This would be a key support level to watch as it held on three separate attempts. While COG appears to have more work ahead of it, it has been relatively strong compared to the markets and could resume its breakout on market strength.

The Bottom Line
The success of any of these setups will likely be linked directly to the health of the markets. While they have resisted a breakdown so far, traders should still exercise caution as the markets have not yet shown clear signs of strength yet, despite the strong rally on Monday. However, with an oversold market combined with a seasonably bullish period, the recipe is there for a strong bounce attempt. As such, traders need to be ready, even if a rally attempt does not come to fruition. If the markets resume heading lower, then it's likely that most of the setups would not even trigger, but with any strength, they could be great trading opportunities.

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Charts courtesy of stockcharts.com

At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.

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