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Tickers in this Article: PWER, PRXL, DTG, S
While the markets have certainly been weak over the past few months, some stocks have held up quite well, refusing to give up much ground. But despite this, the overall environment has not been conducive to holding stocks for more than a few days on the long side. Because the odds for a successful long trade increase significantly when it is aligned with the general markets, even stocks with great looking charts have had a high failure rate. However, with yesterday's market reversal, it's feasible that the markets could surprise many with a rally attempt. If the markets do move higher from here, the stocks that have shown strength are more likely be at the forefront of the rally.

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Power-One (Nasdaq:PWER) is a good example of a stock that has steadily been building a base in the face of declining markets. In fact, PWER appears to have broken out of its base a couple of weeks ago and, after pausing near its breakout area, it's ready to push higher. The recent low near $8.40 would be the first level to watch for aggressive traders looking to participate, but longer term traders should be watching the $8 area, which was prior resistance and the low $6s, which contained all the selling in the past few months.

Source: StockCharts.com


Dollar Thrifty Automotive Group (NYSE:DTG) is another possible stock to watch in case the markets can continue to push higher. DTG had been in a very strong rally from February through May, more than doubling in price. It has been consolidating for the past two months and while it has pulled back over 10 points from its high, it has held above a prior breakaway gap near $40 and the price action has been very tame. Recently, DTG cleared the channel it was following as it corrected, and is now basing near its 50-day moving average. If DTG can clear this small price cluster, it could head back up to test its May highs.

Source: StockCharts.com


Sprint Nextel Corporation (NYSE:S) is another stock that may be ready to move higher if the markets cooperate. Sprint cleared an important level near $4.30 in May and continued to surge as it set a higher high. It has been correcting in a channel that resembles a flag back down to its approximate breakout area. It recently moved out of the flag and is trading in a tight range near its 50-day moving average in a similar fashion to DTG. If it can clear this little range, it could attempt to rally through its prior high near $5.25.

Source: StockCharts.com


PAREXEL International Corporation (Nasdaq:PRXL) is a stock that might be ready for a breakout attempt, but is still under a resistance level. While it has had some sharp swings recently, in the grand scheme of things PRXL has been in a consolidation since April. It held near $20 on a couple of pullbacks and is testing an important resistance level here near $24. This is where the June rally attempt failed and also coincides with a trendline that has marked the recent highs. If PRXL can clear this level, it could set the stage for a push to new highs. However, a failure here is still a real possibility.

Source: StockCharts.com


Bottom Line
While yesterday's price action was certainly promising, traders need to be cognizant of the fact that the markets remain under key moving averages and have yet to clear any important resistance levels. The charts above are showing promise, but much will depend on the markets' cooperation. The potential for a market rally exists, but until now, all rallies have been rebuffed after a few days. As a trader, it is important to outline the setup along with the key levels to watch. These stocks have clear levels defined and it's simply a matter of letting the markets decide whether they will help these stocks or not. Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

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

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