I don’t mean to toot my own horn — OK, actually, yes, I do.
Five weeks ago I wrote in this column: Four Attractive Companies and Their Good-Looking …
Those four ideas — shares of four separate stocks — have risen 34%, 16%, 17% and 20% since we published them.
Am I a genius?
But in a show of humility, I will say the broader market cooperated with me during that stretch.
And before you agree 100% that I am a genius, I probably need to follow through.
After all, buying at the right time only matters if you sell at the right time too, right?
With vision of genius dancing in my head, it’s only appropriate to tell you what to do with those four profitable trading ideas.
So here goes …
One word: Whoa!
Not only has Weyerhaeuser (WY) moved higher as I expected, it just keeps on going. It surged 34% since I wrote to you!
Granted, the risk appetite backdrop has been friendly. But it might be the price of lumber that’s really kept shares of WY cranking.
The reason for lumber’s rise is not obvious.
Whatever it is, lumber appears overextended now.
WY, too, seems due for a technical breather. The first chart above shows my preferred technical outlook — which is for WY to drop back roughly 13%, give or take. From there, it could extend its recent rally to around $35 per share — an increase of 14% from current levels.
If you fancy yourself an active trader, the move is to be short WY during a pullback and long again before shares turn back higher.
A 16% gain in a little over a month is nothing to shake a stick at.
That’s what PolyOne (POL) has done since I wrote to you.
In doing so, it has reached a natural retracement target. I expect a pullback from here that could reach $26 or so — a decline of 13% from where POL is trading at time of this writing.
Such a move would nearly erase all the gains on this position. Keep that in mind.
But if POL extends its recent climb after a pullback, I envision such a rally would take shares to $34 — an increase of about 13% from its current level.
Now, it should not surprise you that my preferred technical outlook for POL looks quite similar to WY.
It’s what works for me and it works for a reason, I guess.
A lot like Weyerhaeuser, Nucor Corp. (NUE) shares have been the beneficiary of a nice move by the underlying commodity in which it dabbles (steel).
Nucor has shot up 17% since I wrote to you.
That’s on the back of a much-needed bounce in steel and iron ore prices. A quick pullback and subsequent extension rally is probably in order for steel.
But such price action could have an outsized impact on shares of NUE — its rally since January has already retraced much of a longer-term decline.
This means a correction could drive NUE as far down as $39 per share, a decline of 14%.
But since a third wave extension doesn’t appear likely to stretch too far beyond current levels, maybe 7% or so, it probably isn’t worth trying to sit through a correction.
Grabbing gains and looking for a better buying opportunity is probably the play on NUE right now.
Applied Materials (AMAT)
Right out of the gate, Applied Materials (AMAT) shot higher.
It helps when the company reports better-than-expected earnings and outlook. But AMAT kept going even after the announcement led shares to gap higher.
Since writing to you on Feb. 22, shares of AMAT moved 20% higher.
And that move actually was within my expectations. (The green circle is the target I originally provided.)
On the daily chart above, and a longer-term weekly chart, AMAT has reached a key target resistance level.
It would appear the most likely direction from here is down for a while.
That’s what I’d expect, especially if a longer-term move is going to take shares above their all-time high.
Again, it probably makes the most sense to secure gains here and look for a buying opportunity if shares decline and stabilize around $17 or $18, which is a significant 13% lower than AMAT’s current price.
A Shout Out to the Man on High
Today being the day after Easter, I hope it was as enjoyable for you as it was for me and my family.
The Easter eggs were bright and numerous, the chocolate and food in great supply.
But it is hope that gives us our greatest satisfaction.
For believers, we recognize Easter as a truly amazing, unfathomable gift of sacrifice … for our sake, so that we may live a life of peace and happiness knowing there is hope of spending eternity with God in heaven.