Two Plays: One Solid, One Speculative

The price action over the last two sessions is taking out the middle of the market leaving traders two options: trade the solid or the speculative ends. Today I have candidates from both extremes.

Clorox (CLX) is a solid citizen with a 3.2% dividend yield, a mild 0.47 beta and, surprisingly, a 9% short interest. In early December last year, a three-day evening-star reversal pattern formed on the daily chart. The stock price moved lower into the beginning of this year, finding a bottom in February just below its 200-day moving average. From there it fought its way back up above its 200- and 50-day averages in a triangle pattern, to a 38% retracement of the decline. Today it is breaking above pattern resistance and testing the 50% retracement level. Moving average convergence/divergence is tracking higher above its centerline while the money flow index, a relative strength measure that incorporates volume, is above its centerline and 21-period signal line. The tightly compressed Bollinger bands reflect the potential for a volatile move, which could be encouraged by some short covering. CLX is a buy after a close in upper candle range above triangle resistance, with an initial trailing stop under the pattern uptrend line....185 more words left in this article. To read them, just click below and try Real Money FREE for 14 days.

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