Global stocks: Buy signal from price formations for two US stocks

Published September 11, 2019

The S&P 500 index moved more or less sideways in Tuesday's trade and closed at 2979.39 points. This level is only 47 points shy of its all time high close in July this year. To look at the broader picture and measuring the optimism among short and long term investors, Investtech has its own tool called the Hausse index.

The Hausse indices are indicators of optimism. In short, they show the ratio of investors who are positive in the market. Hausse1 for short term investors and Hausse2 for medium term investors.

In the given table above, it can be easily seen that both the short and long term investors have a positive outlook of the market. In the past one week, the percentage of optimists for the short term trading range has gone up by 16 points, from 58 to 74. And for the long term investors, there has been a decent gain of 3 points, from 51 to 54.

As you all know, Investtech has invested a lot of resources in research (for the most part in the Nordic markets) over the past 20 years so that our readers and users of technical analysis can get a better understanding of what happens and what kind of return  they can expect if the price is inside a trend channel (rising or falling), or if it has given a breakout from a price formation like rectangle, double top/bottom and head and shoulders formations.

Today I am sharing long term charts of two US listed stocks that have given breakouts from price formations. In the analysis itself I mention what kind of return could be expected if one decided to invest in the stock.

Western Digital Corp. (WDC.US500) Close: 62.27

Western Digital Corp. has broken the ceiling of the falling trend in the long term and has given a positive signal from a double bottom formation by a break up through the resistance at 55.39 dollars. Further rise to 75.11 dollars or more is signalled.

On two different occasions the stock previously gave price breakouts, buy from an inverted head and shoulders and then a sell from a head and shoulders formation. This time it is the double bottom formation and based on Investtech's research: Buy signals from double bottom formations identified in Investtech’s long term charts have historically given increasing prices in the following months. On average, stocks that triggered buy signals have risen 11.3 % in the following three months and 28.8 % annually (see table below). This is 8.1 and 16.2 percentage points better than index respectively, which rose 3.2 % and 12.6 % in an average 3 month period.

There is resistance around 77 and 93 dollars respectively. Support is between 55 and 53 dollars in the short to medium term. Positive volume balance indicates that buyers are aggressive while sellers are passive, and strengthens the stock. The stock is overall assessed as technically weak positive for the medium to long term only because the uptrend in the the stock is not yet established. Higher tops and higher bottoms will confirm an uptrend.

There is volatility risk in the stock with average monthly volatility of 21 per cent.

Investtech's outlook (one to six quarters): Weak positive

Duke Energy Corp. (DUK.US500) Close: 93.94

Duke Energy Corp. is in a rising trend channel in the medium and long term. Rising trends indicate that the company experiences positive development and that buy interest among investors is increasing.

The stock has given a positive signal from rectangle formation by a break up through the resistance at 92.50 dollars both in the medium and long term charts. Further rise to 99.95 or more is signalled. The stock has support at $ 91.00.

Buy signals from rectangle formations identified in Investtech’s long term charts have historically given increasing prices in the following months. On average, stocks that triggered buy signals have risen 8.1 % in the following three months. This is much better than index, which rose 3.2 % in the same period of time (table given below).

The short and medium term momentums of the stock are strongly positive, with RSI above 70. This indicates increasing optimism among investors and further price increase for Duke Energy Corporation. The stock is overall assessed as technically positive for the medium and long term.

Investtech's outlook (one to six quarters): Positive

Today's analyses focus on the medium to long term. The analyses are based on closing price as per September 10, 2019.

Note: The research results mentioned in the article are based on four Nordic markets (Norway, Sweden, Denmark, Finland) and do not guarantee any replication of returns for other markets. 

These instruments are traded in currency based on the Exchange or country they are listed on.

Geschreven door

Kiran R. Shroff
Analist
in Investtech

"Investtech analyseert de psychologie in de markt en geeft u iedere dag concrete trading-voorstellen."

Espen Grønstad
Partner & Senior Advisor - Investtech
 


Investeringsaanbevelingen worden gedaan door Investtech.com AS ("Investtech"). Investtech garandeert geen volledigheid of juistheid van de analyses. Eventuele fouten in de aanbevelingen, koop- en verkoopsignalen en mogelijke negatieve gevolgen hiervan zijn geheel het risico van de belegger. Investtech neemt geen enkele verantwoordelijkheid voor verlies, direct of indirect, als gevolg van het gebruik van Investtechs analyses. Meer informatie omtrent Investtechs analyses kunt u vinden op disclaimer.


Investeringsaanbevelingen worden gedaan door Investtech.com AS ("Investtech"). Investtech garandeert geen volledigheid of juistheid van de analyses. Eventuele fouten in de aanbevelingen, koop- en verkoopsignalen en mogelijke negatieve gevolgen hiervan zijn geheel het risico van de belegger. Investtech neemt geen enkele verantwoordelijkheid voor verlies, direct of indirect, als gevolg van het gebruik van Investtechs analyses. Meer informatie omtrent Investtechs analyses kunt u vinden op disclaimer.

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