Going Their Own Ways

The broader market has been digesting gains for the last two weeks and many stocks having been moving sideways in sympathy. Two stocks I've been watching have been consolidating for about a month and look ready to move in opposite directions.

The potential breakout play is Select Medical Holdings (SEM), an operator of specialty hospitals and outpatient rehabilitation clinics. In November the stock price dropped below its 200-day moving average, dragging the 50-day average along with it, and retesting a long-term uptrend line. It has since been unable to break above the $10 level, which previously acted as support. The consolidation process in this narrow zone, however, has allowed enough time for the technical indicators to stabilize and begin recovering. Stochastics is making a bullish crossover out of an oversold condition, and similar crossovers at key support levels have been buying opportunities. The histogram of moving average convergence/divergence is moving higher, suggesting the indicator is preparing to cross above its centerline. Chaikin Money Flow is back in positive territory, after briefly going negative and is above its 21-period average. The stock is a buy after a daily close in upper candle range above $10 resistance. Use a position size that allows for a trailing stop below the long-term uptrend line....224 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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