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Breakouts and Breakdowns: Charts of PNX, AI, VG, ABK Reviewed

|Includes:AMBC, The Phoenix Companies, Inc. (PNX), VG

Phoenix Companies, Ambac Financial Group, Vonage, and Arlington Asset Investment deserve a much closer look.

If you want to know where the current and next likely trading action is, take a look at Vonage Holdings Corporation (NYSE:VG), Ambac Financial Group, Inc. (ABK), Phoenix Companies Inc. (NYSE:PNX), and Arlington Asset Investment Corp. (NYSE:AI) sometime in the very near future. Here's what you'll need to know about each.

Arlington Asset Investment Corp. (AI) is a pretty solid breakout candidate, though the actual bull run is still building up steam. The key here will be moving above the resistance level - or resistance zone - between 49 cents and 52 cents.

A couple of clues suggest the bullish odds are better than average though. First, the AI chart is somewhat cup-and-handle-esque (you rarely see a perfect one). Second, the buying volume over the last couple of weeks, though far from great, has been getting better for Arlington Asset Investment Corp.

Factoring in how the stock has already been making higher lows since November of last year, Arlington Asset Investment Corp. could really accelerate once these last couple of walls are broken down.

Investors may want to wait on the last bullish blip sets AI off, while speculators may want to go ahead and get in. Either way, our target is a return to the resistance level at $2.00.



Though the Ambac Financial Group, Inc. (ABK) chart may look a lot like that of Arlington Asset Investment Corp. chart, don't be fooled - ABK is considerably more volatile and inconsistent than AI. Nevertheless, it too is on the verge of knocking down a major hurdle.

The key is getting past the ceiling around $1.79... the upper edge of the trading range that's been in place since November of last year. Past that level, there's not another ceiling until the high $3.00, or perhaps even closer to $10.00 (if a full recovery is made).

That's down the road however, and all moot if Ambac Financial Group shares can't even clear the $1.79 area. The move over the last two weeks is its best shot in a while though = volume has been really flowing in. Granted, we saw some solid volume with March's failed breakout as well, but the economy was on much weaker footing then. Now, insurers are doing much better.

If ABK can get just a little traction, this could be the ideal way to play the broad insurer recovery.



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We congratulate Vonage Holdings Corporation (VG) investors on their success earlier in the week, and we applaud the telecom company's swing to a first-ever profit. Unfortunately, this chart says the stock's going to move much lower again.

Yesterday was a major doji bar, on high-volume no less (more volume than with the big surge the day before). This indicates that during the day, the buyers and sellers came to an equilibrium, and the buyers passed the torch on to the sellers.... again. The downside move today confirms the idea for Vonage shares.

The bullish/counter argument is that Google's entry and early interest in their comparable VOIP service indicates that the VOIP business is viable. Google, in fact, could revive interest for all the competitors in the space.

It's not an entirely flawed logic, but there is a flaw... Google can do whatever it wants simply because of its massive presence. Its VOIP doesn't have to be profitable anytime soon, because its search revenue alone could carry the weight of its other ventures indefinitely. Vonage can't do the same. In fact, some analysts argue that Vonage's best chance for survival is to become part of a bigger, broader platform (like a Google).

Moreover, Google's more likely to simply crush the competition rather than stir up business for it.

Between the reversal hints from the VG chart and the fact that optimism for Vonage was almost totally unmerited earlier in the week, we view this stock as a sell/short.

And finally, Phoenix Companies Inc. (PNX) is knocking on the door of a breakout effort.

Yes, this chart looks an awful lot like that of Ambac Financial and Arlington Asset Investment... because it is. Phoenix Companies shares have been consolidating between $1.40 and $2.94 since November of last year. The last rally is testing the upper boundary again, but this time there's something extra.... a lot of buying volume.

Will it be enough to get PNX over the hump and send the stock racing? Obviously there are no guarantees, but that's an awful lot of volume for there to be nothing to it.

The ideal scenario here would be a slow, methodical move past $2.94, and then Phoenix Companies shares can start to accelerate. A sharp blast past that ceiling may invite profit-taking at this delicate stage of the recovery effort. In fact, PNX would do well to slide back a little bit before even attempting a breakout.  That may not be what the market has in mind though, so we'll have to handle that when/if it comes.

Our stretch target price is $10.00.



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Stocks: PNX, AMBC, VG