Stock Trading Predictions & Technical Analysis: FL - Trades above its Weekly 200 day MA for the First Time in Over 2 Years

Saturday, March 13, 2010

FL - Trades above its Weekly 200 day MA for the First Time in Over 2 Years

FL - BUY SIGNAL

After trading sideways between $9.00 and $12.00 for roughly a year, FL has started to make a strong move up about 3 weeks ago when it broke through its key resistance of around $12.00. FL has also been experiencing relatively higher than average volume which is required for this trend up to continue. Despite having a BUY SIGNAL since 3 weeks ago, I decided to take a long position with FL on Friday after getting a BUY SIGNAL from the daily Stochastic which also shows that FL has relatively still some space to move before pulling back. The daily stochastic currently stands around 70 which is still below the overbought territory of 80 and up. The 20 day MA which is depicted by the dashed line of the Bollinger Band is currently FL's strongest support level. FL has managed to stay above its 20 day MA ever since it broke through it 3 weeks agos. Another bullsh sign for FL, is the fact that it managed to close at the highs of the day.

When we look at the weekly chart we can see that FL has broken up above its 200 day MA for the first time since July 2007 when it broke below it. This is very significant as FL has been trending down for the past 2-3 years, and only now are we starting to see the trend shift. The challenge however is to see whether or not FL can maintain its position above its weekly 200 day MA by the end of next week. Another challenge is the fact that the weekly Stochastic is in very overbought territory at 96. However, this doesn't necessarily mean FL will be moving back down very soon, as I have seen stocks continue moving higher while the Stochastic stayed and continued to trend around the overbought level. Keep in mind that stocks that usually trend in the overbought level (e.g. between 60 and 100) is a sign of strenght and usually means the stock is trending up. This has not been the case for FL as it been trending between oversold and overbought territory for the past 2-3 years. Another positive sign for FL is the fact that the upper Bollinger Band has started to trend up, while the lower Band should soon follow if the trend up continues. Finally, I believe that if FL can manage to either stay above its weekly 200 day MA or move even higher by the end of next week, FL would have strong potential to go as high as around $17.00 where its next significant resistance level stands. Aside from this $17.00 level there is very little reistance in FL's way to prevent it from reaching it, and the daily Stochastic's low level leads me to believe that it could reach this price soon. A break above $17.00 could eventually send FL towards $20.00. However, I would first expect a pullback around $17.00 followed perhaps by a sideways trend before it can reach the $20.00 level. FL had first given us a BUY SIGNAL 3 weeks ago after breaking above the $12.00 resistance level, and on Friday we were given a 2nd BUY SIGNAL by the daily Stochastic as well as by seeing FL break through its weekly 200 day MA.

LONG FL

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TECHNICAL INDICATORS

BUY SIGNAL: Indicates the possibility of the start of a new up trend or the continuation of the current up trend. This signal may be often given in the early stages of a potential new up trend that was preceded by a down or sideways trend. Such signals do not always succeed and may fail at time.

BUY: Indicates that the current up trend is already in motion and a BUY SIGNAL was already given earlier. A BUY does not necessarily indicate that the stock will continue higher from here, but simply that the stock is trending up. The further into the trend you decide to take a long position, the more risk you have of seeing it reverse back down sooner rather than later.

STRONG BUY SIGNAL: Indicates a stronger, more significant and reliable signal than a BUY SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG BUY: Indicates that the current up trend is already in motion and that STRONG BUY SIGNAL was already given.

SELL SIGNAL: Indicates the possibility of the start of a new down trend or the continuation of the current down trend. This signal may be often given in the early stages of a potential new down trend that was preceded by an up or sideways trend. Such signals do not always succeed and may fail at time.

SELL: Indicates that the current down trend is already in motion and a SELL SIGNAL was already given earlier. A SELL does not necessarily indicate that the stock will continue lower from here, but simply that the stock is trending down. The further into the trend you decide to sell a position, the more risk you have of seeing it reverse back up.

STRONG SELL SIGNAL: Indicates a stronger, more significant and reliable signal than a SELL SIGNAL which usually has less chance of failing. Such signals do not always succeed and may fail at time.

STRONG SELL: Indicates that the current down trend is already in motion and that STRONG SELL SIGNAL was already given.

HOLD: Indicates that traders who already hold this stock, should hold on as long as the trend persists. This signal is usually given during an up trend for which it would be considered too risky to take a long position at this point.

STRONG HOLD: Indicates that the current trend has been in motion for a while and rarely deviated away from the trend. Although the stock may continue higher, there may not be enough potential up side to trigger a BUY SIGNAL. This type of indicator usually means that the stock has very strong support levels which may have been tested but not broken.

WAIT: Usually given during a sideways trend for which we are waiting for a move that would trigger a BUY SIGNAL or SELL SIGNAL. This could also indicate uncertainty and the risk that would be taken if you were to take a long position at the current level. Taking a long position after giving a WAIT indicator is considered a gamble.