December 8th, 2005

One Chart Guru’s Analysis of Some Stocks

A friend and reader of this blog asked for the Guru’s analysis and evaluation of the charts for four stocks. I’m not sure how these stocks were selected but I can only say that they are not representative of stocks that are in vogue, have momentum or have a clear opportunity of moving up should they break out of well-defined consolidation patterns and through clear resistance levels:

  1. FileNet (FILE): One of 2 that look to have the most potential. It’s a tech stock (favorable industry sector) and there is a clear intermediate term resistance level that it has struggled, unsuccessfully to penetrate 4 times. Also visible on the chart is a long-term resistance level that stretches back to 1996 that is now converging with the intermediate term line. That’s a lot of supply overhang the stock has to wade through. If, however, it navigates this period successfully and penetrates both with conviction (significantly higher trading volume that the current daily average of 160-250,000 shares) then theirs an excellent chance for new all-time highs (over 40). If I owned it I would continue to hold it with the understanding that if it breaks below 25.50 (accompanied by weaker overall market), a drop back to 20-21 is possible.
  2. Adstar (ADST): The other that appears to have potential if it’s able to penetrate the resistance trendline that stretches back to April, 2004, it’s previous high. ADST had a phenomenal run this year increasing 5-fold from a low of $0.62 on May 5 to $3.10 on October 21. A huge increase like this needs a consolidation. How long that breather will take isn’t clear, nor is the likelihood of its being able to gather sufficient strength to penetrate the resistance level and move to new highs. If I owned it I would continue to hold it with the understanding that if it breaks below $2.50 (accompanied by weaker overall market), a drop back to $1.50 is possible.
  3. Milestone Scientific (MS): Here’s a stock that’s literally “fallen out of bed … and can’t get up” and it will take a considerable length of time for a base to develop. Whatever can be recouped from positions in this stock should have long ago been put to work elsewhere; left here it’s “dead money”.
  4. Acxiom (ACXM): I’m unfamiliar with this stock that’s moving up in a clearly defined, 4-year, upward sloping channel. With positive tailwinds from a strong market and support from a positive Tech Services industry group, the stock may continue moving upward until it must scale the previous high around 27, or 15% higher from the current level.
  5. National Interstate Corp (NATL): Another chart I’m unfamiliar with, but one that’s relatively inactive trading only an average 30,000 shares daily. Since trading began early this year, it has been stuck in a 14-20 range. Charts of inactive stocks are relatively unreliable.

I’ll be glad to also give you a reading on your stocks (although I don’t guarantee it will be gratis unless you, too, are a friend). Another opinion never hurts!

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