Breakout Picks For This Week

For this short week I have a four breakout picks and my analysis of where they may go. They are AEA, JADE, OPWV, and SPIL.

AEA is a company in the industry of Consumer Financial Services. Essentially it is a credit card company. For the past 30-days or so, it has been on a down trend. The Stochastic indicator has not yet fallen into the oversold range, but the MACD has fallen under the zero line just last week. The stock itself has created a Harami candlestick pattern that indicates it may be reversing, but the volume on that formation was just under average, which causes me some hesitation. Because it is a stock that is less than $10 per share and pays a dividend, I am considering it for a Covered Call. What I am waiting for is confirmation of this reversal. There is a downward trending resistance line that is almost touching the 20-day moving average of $6.15. For me to get in it this week it will have to break and stay above this resistance line. That is quite a distance considering it's current average trading range (ATR) of 26 cents. However, if it does it successfully on the first day of the week, I will be influenced by the move to get in on the next day as the Fibonacci Extension suggests that it may break $7 before pulling back again. And if it does, I will probably sell the $7.50Jan10 Call against it.

JADE is a company in the cyclical consumer jewelry and silverware industry. Over the last few years it has been beaten down from $13 per share to $2. It has recently broken into the oversold range for both Stochastic and MACD indicators. It is also near an old resistance level that it broke through for it's last rally, so now it is a support level. What hasn't happened yet is a candlestick pattern suggesting a reversal. And if there is no volume behind it when the move is made, then I will also have to wait for additional confirmation such as a break through down trending resistance lines. What is problematic about that is it dropped sharply from one a couple weeks ago and created another one last week. So even if it does break and stay above the most recent one there is quite a gap until the next one. Another red flag on JADE is that it does not pay a dividend, so the only thing I will have to look forward to with it is a Covered Call play. That being the case, I will only paper trade this one.

OPWV is a company in the Software & Programming industry. Over the past few years it has been beaten down from $22.50 per share to $2. Much further back during the Dot Com era, it was once valued at $600 per share. "How the mighty have fallen," comes to mind. But what do I care about the companies as long as they make me money, right? Anyway, I am not looking for much from it. What I know is that it has dropped to support, again. And in doing so, it has also dropped into the oversold range for both the Stochastic and MACD indicators. On Friday, it also created a Harami candlestick pattern that suggests that a reversal is possible. The volume on this candlestick formation was much greater than average and strengthens the probability of the reversal. However, the red flags are that it hasn't payed a dividend for a long while, and it is possibly too low in price for it to be a wise Covered Call play, not to mention I can identify two downward trending resistance lines not too far apart from each other. As a consequence of these red flags, I will only be paper trading it for practice. But I will only make a play on it after it confirms the change of direction.

Last on my list is SPIL. SPIL is a company in the Semiconductor industry. While being in the oversold range for both the Stochastic and MACD indicators, on stronger than average volume it bounce from a new low. That new low was created near a few support levels in the $6 range. The only thing left for it to do in my criteria is for it to break through the downward trending resistance line that intersects at about $6.75 on this coming Monday. It has been paying out a an erratic dividend amount once a year for 4 years so I don't think it is guaranteed. With that red flag understood, I think I will still invest in it, but only if it breaks and stays above the downward trending resistance line. Afterwards, I will be looking for an opportunity to sell the $7.50Jan10 Call against it. That is my opinion, you can take it or leave it.

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