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Breakouts
for May 4th : The first pick, SJM, is on its fourth appearance in the newsletter. The stock is not a technical breakout but now is a good time to raise former stops to the current level. A breakout will be defined by a close over $57.09. I have not changed the price target as declining volume on each new high is somewhat of a concern to bulls. On the news front, the company completed the acquisition of Eagle Family Foods Holdings for $133m cash. The MACD is in consolidation after a 'sell' trigger, but remains above support. The bullish trend has stayed strong as marked by an ADX above 40 and 7 weeks of overbought stochastics, but this too looks to be coming to an end. The point-n-figure chart holds to an ascending triple top breakout from February 16th with a price target of $62. The second pick, NTLS, cleared $20.80 resistance on the back of Q1 earnings and was accompanied by a fresh MACD 'buy' trigger. However, the MACD needs to be watched as it is nestled against the bearish divergence. On-balance-volume and bullish trend strength [+DI; ADX > 20 and rising] are improving which are two factors in favor of a break of the MACD bearish divergence. Thursday's break looks to kick start the October 2006 rally as it was accompanied by an ascending triple top breakout on the point-n-figure chart with a chart target of $37.50. The third pick, PQ, reversed a bear trap on the break of $11.75 support and subsequent counter rally. The upside move cleared both the 50-day and 200-day MAs after the former had crossed the latter as part of a "Golden Cross" (a bullish long term signal). The trigger for the move was Q1 earnings. As with the second pick there was a fresh MACD trigger 'buy' (but also a bearish divergence in the trigger line to consider) and a new reaction high in bullish trend strength [+DI; ADX < 20 and rising - but no confirmed bull trend yet]. On-balance-volume has run in favor of accumulation, which should strengthen the bull trend. The point-n-figure chart has a bearish target of $7.00 and it will take a move to $15 to negate.
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