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I guess it's only appropriate that
the oil and oil services sectors are moving, now that oilman George W. is taking
over. On TradingMarkets.com today, I saw these groups moving and I thought we'd
take a look at Baker Hughes (BHI).
As I've mentioned before, you want to focus on stocks trading above their 50-
and 200-day moving averages, and that have a high relative strength. The
TradingMarkets.com three-month relative strength for BHI is a respectable 89,
and the stock certainly is trading above both averages. In addition, the stock
recently broke out to 52-week-high-territory before pulling back.
Remember, stocks in motion tend to stay in motion. The pullback here was in
the form of a pennant, which is a continuation pattern. When you see a stock
form a pennant after a strong move up, look for a breakout to the upside. Sure
enough, Monday BHI ran up 2 3/8 points. An aggressive trader might look to
follow this trend to the upside. Finally, notice the support at $40, which was
resistance in November. It's very important to know where your support and
resistance levels are before putting on a trade. To find resistance, we have to
go back to April 1999.
And what about our recent selections? Of the recent stocks, Nike (NKE) has done the best, up to $54 from $48, and Cigna (CI) is up almost $4.00. Check the archives for the rest.
Remember, I do not recommend purchase or sale of stocks in this column--I try to show you important things to look for in a stock setup.
See you tomorrow,
Brice
