Brace yourself for another exciting week of trading. With futures pointed higher early Monday morning, this week could bring higher numbers for top stocks with it. Or – if some traders are to be believed – a key resistance level could smash share prices back down this week, leaving them in a flaming heap on Wall Street. So, which is it?
The traders are right to be less than bullish right now. The 50-day moving average is acting as a potentially tough resistance level right now for the S&P 500 index – one that top stocks could have trouble surmounting given the mixed economic fundamentals of 2010. If we can breach the 50-day, however, the market could be ready for another rally leg.
Today is going to be the biggest tell given that the market is threatening to open right on the 50-day. Pay attention to where trading ends at 4:00 p.m. today; that's the best indicator of how to play things. Whichever way stocks go this week, we're setting up once again to make some loot with some potentially favorable penny stock plays.
The traders are right to be less than bullish right now. The 50-day moving average is acting as a potentially tough resistance level right now for the S&P 500 index – one that top stocks could have trouble surmounting given the mixed economic fundamentals of 2010. If we can breach the 50-day, however, the market could be ready for another rally leg.
Today is going to be the biggest tell given that the market is threatening to open right on the 50-day. Pay attention to where trading ends at 4:00 p.m. today; that's the best indicator of how to play things. Whichever way stocks go this week, we're setting up once again to make some loot with some potentially favorable penny stock plays.
In case you're not familiar, each week, The Penny Sleuth takes a look at a list of penny stocks that are exhibiting abnormal volume, strong technicals, upcoming news, or another catalyst that suggested they might be making a material move in the coming week.
As usual, while our Watchlist errs on the safe side of small-caps, using technical analysis to tell us where a stock is headed, we opened the comments up to readers again this week, giving you the chance to offer up more speculative penny stock plays.
Check out the comments after this article on the Penny Sleuth website to get a glimpse at a slew of new user-submitter penny stock picks — and the chance to submit your own!
First, though, let's take a look at this week's breakout penny stocks worth watching...
Fred's Inc. (NASDAQ: FRED) – Memphis-based Fred's operates close to 7,000 discount stores in the southeastern U.S. The chain, which focuses on serving mid-to-low income families in small towns, could make for a good play this week with a breakout above two key levels on Friday. Shares broke out above the 50-day moving average and downtrending resistance, two levels that threatened to quell Fred's recent rally. Now, with shares unbridled above that level, the potential for a significant gain is real. Wait for a second consecutive close above the blue lines before considering taking the trade.
Solutia, Inc. (NYSE: SOA) – If you've been following our daily watchlists, chemical maker Solutia shouldn't be an unfamiliar name to you. On Thursday, I told you about the bullish ascending triangle that was forming in shares of the stock, a pattern that continues to be compelling right now. A breakout above horizontal resistance marks the "buy" signal on this stock… it's just not there yet.
Navigant Consulting (NYSE: NCI) – Our sole short-side play this week is Navigant Consulting, a specialty consulting firm that assists companies address risk uncertainties. One risk uncertainty that management hasn't addressed is the bearish head and shoulders pattern that's already formed in shares. The trigger to bet against this stock is a breach of the blue shoulder line above.
ESCO Technologies (NYSE: ESE) – ESCO Technologies is an engineered product producer that's based in St. Louis, Missouri. The company's shares are currently being bounded by a triple top on the upside and a double bottom on the downside – a set-up that gives us significant protection right now. With a breakout above downtrending resistance in play, this stock could be headed higher this week.
Share Your Top Penny Stock Picks…
Once again, we're going interactive this week...
Just visit the Penny Sleuth website, and post your best penny stock pick in the comments section of this week's Watchlist by Friday, February 26. The two readers with the best performing picks each score a Penny Sleuth Prize Package that includes a special edition DVD of I.O.U.S.A.
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