Commentary: The market has been strong in 2012; the S&P 500 SPDR (NYSE:SPY) ETF, which represents the S&P 500 stock index, is up 6.04% YTD. After putting in a high last Thursday, SPY has failed to moved above that high in the three trading sessions since. Despite this brief sideways lull, there are stocks which continues to push higher and are leading this market higher. Outperforming the market throughout the whole year and having already broken above resistance, these stocks are trending higher and at least for now show no signs of stopping.
Tata Motors (NYSE:TTM) is up 53.51% this year to $27.80 from $18.11. The ascent has been sharp, keeping the RSI in a perpetual “overbought” state, yet that does not seem to be dampening the performance. On-balance volume still shows this stock being accumulated. In 2010 the stock made a run from $17 to a high of $37.65 in five months. If 2011 is setting up a similar scenario there are a few levels to watch. $29 is a resistance level from mid-2011. Breaking through this sets up a test of the next resistance levels at $30 and $31. Tuesday saw the stock accelerate and blast higher out of the small consolidation pattern it had been in. A drop back the below that consolidation pattern, $25, indicates a further pullback. Since Tuesday was also gapped higher, the low on Tuesday–$26.70–an be used as a potential stop as that gap should now provide some support. (For related reading, see Interpreting Support And Resistance Zones.)
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Coach Inc (NYSE:COH) is another stock that seems relentless this year, up 26.38% to $75.82 from $60.04. Looking at the chart there have been very few down days this year, and with no resistance in sight it is unclear where the stock will stop. The RSI is confirming the move higher and the on-balance volume is also moving up, which is a positive sign. On-balance is not as strong as it should be though for the current price, which is cause for some concern, yet price is showing no signs of stopping just yet. Based on Fibonacci levels and the trend channel movement the stock has been moving in, the upside target is estimated at $81 to $83. Due to the steep ascent there is not much support near by; $70 to $68 is the nearest support area. A drop below $67.35 signals more downside to come. (For related reading, see Top 4 Fibonacci Retracement Mistakes To Avoid.)
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St. Jude Medical (NYSE:STJ) is moving solidly in 2012, up 24.94% to $43.64 from $34.93. The stock was hit hard in the last half of 2011, losing more than 40% of it’s value. This rally the stock has been on puts it very close to the 50% retracement level of the 2011 decline. While there is no immediate resistance overhead, not until $46, there was a lot of activity in the current price area back in August and September of 2011. That could be a potential problem as the on-balance volume indicator is not confirming this move above November price levels. Despite the technical obstacles, St. Jude made a new high for the year on Tuesday, closing above a recent price range and indicating further upside. The next target is $46, primary resistance. Support is at $42, with a drop below signaling a further decline. (For related reading, see The Psychology Of Support And Resistance Zones.)
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Gap Inc (NYSE:GPS) has been consolidating since February 2, a day on which it gapped significantly higher. Tuesday saw the stock gap higher again, and break out of the consolidation area. The stock is now up 20.43% for the year, to $22.34 from $18.55. With Tuesday’s signal of strength, based purely on price, the stocks could test the very significant $23.50 level. In 2011 $23.50 was elusive and only once, intra-day, did Gap climb above the mark, putting in a yearly high at $23.73. There are some concerns though. While volume was large on Tuesday’s gap higher, it was smaller than what we have seen on previous big moves. Therefore, volume is not confirming so it makes sense why there is a also a divergence on the on-balance volume indicator. For this stock to keep running it will need significant volume to back it up, especially if it is to climb to, and surpass, $23.50. But right now, price continues to march to the upside and RSI is acting very well. Near-term support is at $22 to $21.85, with primary support at $21. A drop below $21 indicates the stock could slide further, especially if volume continues to wane.
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Bottom Line
2012 has been a good year for stocks, and these four stock are still breaking resistance and leading this market higher. All have at least some room on the upside to keep moving, but risk should be always be managed and support levels should be watched. The trends are aggressively higher at this point, but with aggressive rallies like this the corrections can also be steep. (For related reading, see Connecting Crashes, Corrections And Capitulation.)
Charts courtesy of stockcharts.com
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