As the U.S. markets roll into the last month of 2015, several big-name stocks have been breaking out to new 52-week highs. Is it too late to be buying these stocks now, or is there more upside remaining? Here’s a look at what technical analysis says about how much higher these four breakout stocks can climb in the short-term.
From September 2013 to September 2014, Lowes traded in a horizontal channel between $43 and $50. Then, after about a year of consolidation, the stock broke out above $50 and never looked back until it reached $75 in early 2015. For most of this year, the stock has again been range-bound, this time between $65 and $75. However, within the past couple of weeks, Lowes has broken out above $75 for the first time.
How much higher can it go from here? If the previous breakout is a sign of things to come, Lowe’s could be in for a 50% gain within the next six months to around the $112.50 level. Lowe’s traders should be watching for any move back below the $75 level as a sign of a technical breakdown.
Nike’s recent push to new all-time highs is not really a break-out as much as it is seemingly the status quo for the growing company. Nike’s stock is up 508% in the past decade, so shareholders are certainly used to the stock making new highs. For now, Nike’s recent push above $130 means that the stock continues trading inside its multi-year upward channel.
While that’s good news for long-term investors, it likely means very little upside remaining in coming weeks for short-term traders.
Campbell is another example of a stock at all-time highs that has a strong long-term technical outlook but a weak short-term outlook. Above $53, Campbell’s stock is near the ceiling of its upward-channel and could soon see a pullback to the $48-49 level, the floor of the channel. Long-term investors are fine with a pullback, as long as the stock stays within the channel.
Short-term traders, however, should be looking elsewhere for alpha.
Refiner CVR Energy is a slightly more complicated case. Of the four stocks, CVR has the most uncertain longer-term technical outlook. Clearly, the company has some short-term momentum pushing it to new 52-week highs.
The two green lines in the chart represent short-term and long-term support levels at around $42.50 and $30, respectively. The two red lines represent short-term and long-term resistance at around $50 and $55, respectively.
The blue line at $47.80 represents the stock’s 2014 high. While it’s true that CVR recently traded above this level, it was only by a matter of cents, which is far from a convincing break-out.
The behavior of the stock over the next few weeks will be critical in determining whether the $47.80 level has in fact been breached, which could mean a test of $55 sometime in early 2016. Conversely, if the recent move was merely a false breakout, the stock could soon be headed back down to the bottom of the channel at $42.50.
Disclosure: the author holds no position in the stocks mentioned.
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