A fear of heights is perhaps the main block to investors going for the momentum trade – even though this has been the way to go in most instances of the past decade, and a spectacular bull run. The answer to the conundrum currently, and in most situations is to take things on a case by case basis. The three charting situations that follow illustrate some of the merits and otherwise of technical analysis in a mature bull market.
Acasti Pharma (ACST): Key $2 Support Zone
Phase 3 Trial speculation has been like a red rag to a bull for hedge funds and other fast money in the market, something which has marked out this stock in a positive way, even before one investigates the daily chart. From a technical analysis perspective this stock has been a chartist’s dream, with the first big break being of a red October line of resistance near $1 in mid June. The subsequent rally caused a near tripling of the share price within 6 weeks. The next big break was just last week at $2.20, with the push through a red July resistance line. The stock rallied well in recent days before the latest sharp correction, with the prospect now that while there is no end of day close break back below $2.20 we could still see considerable upside. The top of an October 2018 price channel at $3.50 could be hit over the next 1-2 months. Below the 50 day moving average at $2.03 would however delay the prospect of fresh highs.
Amarin Corp (AMRN): Support Above 200 Day Line
Speaking of stocks trading at decade highs, we have Amarin at just such a position. While there has already been something of a knock back from the aftermath of a long awaited FDA approval, the stock continues to consolidate well above its 200 day moving average at $18.25. While there may continue to be something of a churn in the 200 day line zone up to $25, the longer the gap higher through $20 is held, the greater the prospect of an eventual breakout towards the top of a May rising trend channel at $35 could be seen over the next 2-3 months as a best case scenario. Of course, simply waiting on a clearance of $25 to then anticipate $35 would be the momentum strategy of choice for those concerned we have already seen a bull trap.
Colgate (CL): Price Channel Support Towards $67
Dividend growth and margin fears have hurt Colgate shares since the summer, something which gives the impression that the relative new CEO has inherited a poison chalice. Therefore it may take more than getting on the TikTok digital marketing bandwagon to revamp market perception. However, judging by the daily chart of Colgate there has been a slow change to the positive, coming in the form of a break of a red line of resistance from September at $68. It also helps that the blue 50 day moving average at $67.63 – the floor of a rising trend channel from December. Therefore, the chances are that at least while there is no weekly close back below the December uptrend line the upside here should be at least towards the 200 day moving average at $70.31. What would really help the cause of the bulls would be a clearance of the 200 day line, an event which could then open up Colgate to fresh strength towards the top of last year’s trend channel at $78 by the end of Q1 2020.