Finance: Using monthly charts to analyze trends
PHUKET: Monthly charts are among the first buy signals I look for when selecting stocks because they show bigger time frames where long term trends can be seen. As we enter the summer months, a short term pull back could still happen and this would be a perfectly normal price action.
Lately we haven’t yet seen any price action to suggest a pullback. For the longer term, we still have to lean toward the upside, assuming that the bullish trend of the previous months will continue.
Looking over several monthly charts for a variety of stocks, we are starting to see more stocks breaking into new highs.
Tech giant Apple (NAS DAQ: AAPL) got caught up in the overall choppy market trading over the past two years. Late last year, AAPL began breaking out to have about five months of solid gains that put shares at an all time high.
Online retail behemoth Amazon.com (NASDAQ: AMZN) recently had another strong monthly close at new all time highs and has steadily closed higher for the past couple of months.
Small cap building materials manufacturer Builders First Source (NASDAQ: BLDR) got clobbered in the wake of the financial crisis and is still not back up to pre-crisis highs. However, its monthly chart is starting to break out from a strong cup and handle base. This should also be considered a bullish sign for other housing related stocks.
Small cap online healthcare marketplace stock Care.com Inc (NYSE: CRCM) had Google Capital take a big position in it several months ago, triggering a big gain as other investors rushed in. The technical chart now shows a nice consolidation since 2014 while in March, shares moved to a two year high on huge volume – a very bullish sign.
Large cap oil and gas stock EOG Resources (NYSE: EOG) is still breaking lower in its monthly charts for the past few months. However, the weekly charts show weeks where shares are ending higher. This is a bullish signal making the stock worth watching to see if its monthly closes can move higher.
Small cap biopharma stock Theravance Biopharma (NASDAQ: TBPH) has broken out from a bullish cup and handle formation to close above the ‘cup’ portion on its technical chart with shares also above its 2014 IPO debut level.
Large cap railroad stock Union Pacific Corporation (NYSE: UNP) had broken out from its post financial crisis consolidation pattern and had a good run from the US$40-110 level before falling off. UNP has just had another big breakout and appears to be heading back up.
Mid cap global life sciences software stock Veeva Systems (NYSE: VEEV) recently hit an all time high on its monthly chart to close above its IPO price after consolidating sideways for around 2.5 years – a fairly bullish sign.
The latest S&P 500 chart also shows the index closing higher for five months in a row (or roughly since the end of the US elections). This has ended roughly two years of consolidation or sideways movement.
Don Freeman, BSME, is president of Freeman Capital Management, a Registered Investment Adviser with the US Securities Exchange Commission (SEC), based in Phuket. He has over 20 years experience working with expatriates, specializing in portfolio management, US tax preparation, financial planning and UK pension transfers. Don can be reached at 089-970 5795 or freeman capital@gmail.com.
— Don Freeman
