Trade Recommendation: Buy IIN, PDVW, and ULH

The US stock markets continued their magnificent run last week. The S&P 500 has broken above another critical level of 2600. The markets have been so bullish that they haven’t even seen a fall of greater than 3% since November 04 of last year.

Key points

  1. The S&P 500 has closed above 2600 levels. It remains strong.
  2. Buy strength in this market
  3. Buy IIN, PDVW, and ULH

The 388-day run without a 3% decline has broken the previous record created in 1995 by 18 days. If history is any evidence, December is unlikely to cause a slump. There are many other records that the current bull market is breaking.

However, the farther the market runs without a correction, the more vulnerable it becomes. Therefore, we continue to advise against investing for the long-term at the current levels. Notwithstanding, we recommend swing trading to benefit from the short-term momentum in the markets.

Presently, the momentum is clearly in favor of the bulls. We want to own stocks that are making new 52-week highs, as they denote strength. Let’s see the chart patterns that we like.

IIN – Buy 17.6, Stop loss (SL) 15.5, Target 21

Weekly chart

The stock has been a 4-bagger, since bottoming out in mid of last year. History shows us that the stock has a tendency to spike for a short period of time, which is invariably followed by an equally sharp plunge. Therefore, this is not a stock that should be held for the long-term. The best way to play it is to enter when the momentum is strong and sell when the momentum weakens. Though the RSI is in the overbought territory, previous peaks show that there is still room for the RSI to rise.

So, what’s the entry and exit levels for this trade?

Daily chart

The daily chart shows a sharp rally from the $11 levels to $17 levels within ten days. Following the sharp rise, the stock traded sideways for five days, before finally breaking out on Friday. As the stock rallies to new 52-week highs, we expect it to pick up momentum. Its next target is $21. Therefore, we recommend a buy on the stock at the current levels of $17.6, with a stop loss of $15.5.

PDVW – Buy 35.8, SL 33, Target 40

Weekly chart

Since its listing, the stock has been in a downtrend with the odd spike in early 2016, which did not sustain. However, PDVW has found strong support at the $19 levels, which has held since last year. The stock broke out of the basing pattern in early-August of this year. It doesn’t have any overhead resistance until the $42 mark. We believe that the new uptrend is likely to sustain for the next few days.

Daily chart

The stock had been trading inside a range of $19 on the lower end and $27.5 on the upper end since June of last year. The bulls broke out of the range in early-August. Thereafter, the retest of the breakout levels was successfully completed in end-October. The stock resumed its uptrend in mid-November, rising from $28.45 to $35.5 within four days. This shows a strong underlying momentum. Following the spike, the stock consolidated for three days and resumed its uptrend on Friday. We believe the current leg of the rally will carry the stock to $40 levels, though a move to $42 is also possible. Therefore, we recommend a buy at the current levels of $35.8 with the stops being placed at $33.

ULH – Buy 23.2, SL 20.5, Target 28.5

Weekly chart

The stock has not gone anywhere in more than a decade. However, it has a history of spiking once it starts an uptrend. It did that in 2006 and again in 2013. After spending most of the past two years in a range between $12 to $18, the stock has broken out and is on its way up. We believe that the current uptrend is likely to rally towards the downtrend line at $30 levels. Let’s identify the critical levels on it.

Daily chart

The stock started a strong move up from the $14 levels on August 21. The subsequent rally peaked just above $22 levels on October 06. Thereafter, the stock entered into a sideways correction, which found support at the $21 levels. On Wednesday of last week, the stock attempted to breakout of the consolidation, however, the bears pushed the stock back into the range. Nevertheless, on Friday, the bulls managed to breakout of the range once again. This shows the demand for the stock. We expect the stock to now rally towards its target objective of $28.5. Therefore, we recommend a buy at $23.2 with a stop loss of $20.5.

Featured image courtesy of Shutterstock. 

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Author:
Rakesh Upadhyay is a Technical Analyst and Portfolio Consultant for The Summit Group. He has more than a decade of experience as a private trader. His philosophy is to use technical analysis for momentum trading and fundamental analysis for long-term positions. Rakesh likes to keep himself fit by lifting weights and considers himself to be a spiritual person.