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Breakouts
for July 31st: The first pick, BTRX, breached twin resistance of declining resistance and prior near term highs from June. The stock gained on FDA approval for a dermatitis treatment but given the extent of 5-month declines could see a retreat to $6.50 (resistance in May and June) - GTC buy orders should benefit. Technicals are aligned in favor of bulls with a strong bullish divergence in the MACD trigger line and large gains in +DI (but as yet no strong trend as measured by ADX). Moving average traders may wish to wait for a break of the 200-day MA currently at $7.79. The point-n-figure chart is of little help at this point of the bottom. The second pick, CSTR, had failed in its June attempt to rally as prices stalled at the "Death Cross" of the 50-day and 200-day MAs. Friday's gains on earnings pushed prices above both 50-day and 200-day MAs. Technicals are bearish but improving, led by the 'buy' in the MACD trigger line and a bullish cross in the +DI/-DI lines. The initial upside target is the April breakdown gap. It will take a move to $30 to initiate a double top breakout on the point-n-figure chart and negate the current (bearish) target of $14.00. The third pick, RICK,
is a thinly traded issue which has enjoyed solid gains from lows of $2.55 in early 2005. Friday's breakout ended a 3-month base, helped by support generated at the 50-day MA. There was no news to account for recent gains - the most recent announcement was made in mid-July on plans to add $5 million in revenue through the use of acquisitions. The point-n-figure chart holds to a double top breakout from July 18th with a price target which has been exceeded - I am looking for a test of psychological resistance at $10.
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