There’s a Lot of Upside With Stocks Reversing Trends

The SPX continues to hover below the 2,600 mark with tightening range.Indicators show that the index is still in extreme overbought territory. It must pull back in order to sustain its ascent. Therefore, we continue to focus on stocks with limited risks but offer significant profit potentials.

Here are a couple of names that are either making a reversal or ending a correction phase.

AIV – Apartment Invt & Mgmt Co

The stock has been on a downtrend since 2007 when it hit its all time high of 65.79. 10 years later, AIV has reverse its trend after it quietly broke out of its 35 resistance. Currently, the name is creating a base at 45 which is a very encouraging sign. It needs to turn 45 into a strong support level to have a chance at breaching major resistance at 50.

More often than not, stocks reversing from a multi-year downtrend have huge profit potential. They are at the point where risk-reward ratio is most favorable. AIV, for example, has come out of a 10-year downtrend, and it appears that the general public has yet to purchase the stock. Now is an opportune time to get in.

Institutional investors are probably quietly building volume at 45 which means you have time to purchase the stock. Once the name goes above 50, it will attract momentum traders as well as the public to push the stock to 62 first. Break that, and we get the all time high of 95.

Weekly AIV Chart

Monthly AIV Chart

Summary of Strategy

Buy: Build volume now and buy more once it breaches 50

Support: 45, 42, 40, and 35

Resistance: 46.5, 50, and 62 last

Targets: 65 and 95

Useless: Only when support at 35 is broken

AXP – American Express Co

The stock has been correcting since 2014 after making the all time high of 96.24. We saw it retreat to 53 and established a base at that level. AXP has been rallying since and has now broken the major resistance at 93. In the last few weeks, however, the name has retreated from 96 and is currently forming a base at 93. This is an encouraging development as the stock needs to establish strong support to have a chance at breaking its all time high of 96.24.

Build volume at 93 with the intention of buying more once the stock breaks its record high. There is no known resistance after AXP moves above 96. The name has a clear path to the target of 135.

Weekly AXP Chart

Monthly AXP Chart

 

Summary of Strategy

Buy: Build volume now and buy more once it breaches 96

Support: 93, 90, 87, and 77

Resistance: 96.24

Target: 135

Useless: Only when support at 77 is broken

 

Featured image courtesy of Shutterstock.

Kiril is a CFA Charterholder and financial professional with 5+ years of experience in financial writing, analysis and product ownership. He has passed all three CFA exams on first attempt and has a bachelor's degree with a specialty in finance. Kiril’s current focus is on cryptocurrencies and funds, as he does his own crypto research and is a Product Manager at Mitre Media. He also has his personal website, InvestorAcademy.org where he teaches people about the basics of investing. His ultimate goal is to help people with limited knowledge of finance and investments to create investment portfolios easily, and in line with their unique circumstances.