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  • Breakout Patterns Materialize For ALY, HW, BRT, AET 0 comments
    Aug 24, 2009 4:25 PM | about stocks: HW, ALY, AET, BRT
    BRT Realty, Headwaters, Aetna, and Allis-Chalmers Energy look like they're starting big upside moves.

    Lots of stocks have been performing well as we slide into an economic recovery. However, not as many stocks appear to have more potential in front of them than behind them. Some of the names that are just now starting to perk up are Aetna Inc. (NYSE:AET), Allis-Chalmers Energy, Inc. (ALY), BRT Realty Trust (NYSE:BRT), and Headwaters Inc. (NYSE:HW). Check out these highlights for each potentially-bullish chart.

    Though a little frothy in the very short-term, BRT Realty Trust (BRT) has been persistently making higher highs and higher lows since November of last year. It's a paradigm shift in comparison to 2008's (and 2007's) implosion.

    In the near-term, BRT Realty Trust is still a range-bound stock. That range is currently between $3.47 and $6.22, though both are rising every day. Based on what we've seen of late, there's no reason to assume BRT will remain range-bound. And, as was mentioned already, the stock is slightly overbought in the short run.

    All that being said, the real attraction to BRT Realty Trust is the potential - perhaps hope - that the upper resistance line will actually crack rather than send the REIT lower again the next time it's tested. See, with BRT shares formerly trading above $30.00 and currently under $5.00, there's a massive amount of room to recover now that the 200 day moving average line (green) has been hurdled.

    In other words, a BRT Realty trade could turn into an investment.

    BRT Realty Trust was also signaled as a 'buy' from the Small Cap Network proprietary stock-selection system.


     

    Aetna Inc. (AET) is mirroring BRT Realty Trust in many ways.... such as a cross above the 200 day line, and the hurdling of a significant resistance line. And yes, AET shares have also been signaled by the SCN proprietary system (which caught the last two upswings very well, and exited them at the right time). However, unique to Aetna is a very compelling degree of buying volume.

    Though the entire healthcare industry is subject to change-efforts from the current Presidential administration, as each day passes, the threat of a sweeping (read 'profit-hurting') overhaul becomes less likely. In fact, the market is more confident in Aetna now than it was prior to the reform agenda being put into motion.

    The twelve-month price/earnings ratio for AET is a decent 11.0. The forward-looking price multiple of 9.2 is even better... and perhaps not optimistic enough.

    A near-term target of $34.80 or so is reasonable, but the $44.00 area would reap the full benefit of the Aetna chart's potential - even if it will take longer to get there.


     

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    The breakout effort from Allis-Chalmers Energy, Inc. (ALY) hasn't fully matured yet, but it's getting there. The reason it's worth watching in the meantime is that when/if ALY shares get traction, a move from $3.00 to $15.00 isn't out of the question.

    The key here is a combination of a wedge-shaped chart (blue lines), and - once again - a cross above the 200 day moving average line (green). Both will be hurdled at about the same time if the bulls can just give Allis-Chalmers Energy the right nudge.

    And, it's possible this time because there's something we're seeing now we didn't see before... volume.

    ALY was trading above $15.00 in mid-2008, and above $20.00 in 2007. As the economic recovery grows and oil demand increases as a result, Allis-Chalmers Energy should swing back to profitability.

    Our short-term target is $4.44. Longer-term, $15.00 is possible.


     

    Headwaters Inc. (HW) and Allis-Chalmers also have a lot of similarities.... a wedge-shaped chart is guiding HW shares right up to the all-important 200 day moving average line. The resistance side of the triangle is under attack today; the 200 day line looms above at $4.20 (versus the current price for Headwaters shares of $3.69.)

    Though at first glance the HW chart looks as if it could go either way, it's worth mentioning that the stock has been making higher highs and higher lows since March. So, the odds slightly favor a breakout.

    Headwaters has been helping the cause too. The company almost doubled last quarter's earnings estimates by posting profits of 81 cents per share; analysts were only expecting 43 cents.  Perhaps next year's full-year earnings guess of 10 cents is too low as well.

    Traders should set their own short-term target for HW, but our long-term target is $15.00.
     
     

    If you'd like to know of any changes in our opinion of these four stocks (or if we officially recommend them as trades), be sure to sign up for free Small Cap Network newsletter today. It's delivered 2 to 3 times per week.
    Stocks: HW, ALY, AET, BRT
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