Thursday, February 2, 2012

Stocks On Fire In 2012: IBN, LYB, RBS, SLT, SPY

Overall, stocks have been pushing higher in early 2012, with the S&P 500 SPDR (NYSE:SPY) ETF up 3% from $127.50 to $131.32. Yet, some stocks have been exploding. The following foreign stocks, all listed on the NYSE, have been on fire in 2012, up more than 25% so far.

Royal Bank of Scotland (NYSE:RBS) is up 27.38% this year, from $6.61 to $8.42. The stocks has been recovering after hitting a multi-year low at $5.36 in November of 2011. Since January 19, 2012 the stock has been trading between $8 and $9, unable to reach either level. A breakout from this range it likely to be a significant factor in the long-term direction of the stock. Overhead resistance is at $9.15 - the October 2011 high. If the price pushes through that resistance level there is little resistance until $10 followed by $11. On-balance volume is rising which is a positive and should continue to rise if the price moves higher. A drop below $8 on the other hand is a warning signal that the stocks could slide back to lower levels.

Sterlite Industries (NYSE:SLT) is up 26.56% in 2012, from $7.23 to $9.15. Like RBS the stock hit a multi-year low in 2011 at $6.64 and has been recovering since. The recent recovery has broken the downtrend which was in place since mid-2011, but the stock is struggling to break through resistance at $10. If $10 is broken to the upside the target is $11.50. $8.50 to $8 is the support area based on a gap up which occurred on January 17, 2012. A drop back into that support area - especially below $8 - is bearish, but if the stock can hold support and push through resistance the stock could recover much of its 2011 losses. On-balance volume is rising, and is a positive for the stock price.

Lyondellbassell Industries (NYSE:LYB) is up 28.77% this year, from $33.47 to $43.10. The move higher has already cleared many of the resistance levels in its path. Still overhead though is $45 followed by the 2011 high at $48.12 (on an dividend adjusted basis the stock has already cleared these levels). While the stock is currently in over-bought territory, on-balance volume is moving aggressively higher confirming that buyers are willing to put their money on the line. With the stock recently breaking through resistance at $42 it now likely the high at $48.12 will be tested. A move through there should test the psychologically important $50 level. Support has developed just above $38.50 and a drop below this level is an early warning signal. There is also upward sloping trendline support at $37, drop below this level warns of a potential reversal.

Icici Bank (NYSE:IBN) lost more than half its value between July and December of 2011, but is up 28.63% from $28.15 to $36.21 in 2012. Heavy resistance lies overhead at $40, which is the level to watch. A rise above $40 could trigger buying into $45. The stock traded in a range between $45 and $50 in mid-2011 which should now act as resistance...at least initially. The rally higher this year has been aggressive but the stock put in a recent low at $33.85 (hammer candle) on January 30. If the price continues to push higher in early February, threating to break the $40 level, this low can be used as a stop loss level. The stock remains in an uptrend as long as the price stays above $32.75, a drop below signals a potential reversal.

The Bottom Line
As the overall market has pushed slightly higher in 2012, some stocks have exploded. RBS, SLT, LYB and IBN are all up more than 25% year-to-date. The on-balance volume indicator shows strong buying interest in these stocks, and if resistance is broken these stocks could continue to make big gains. There is resistance overhead though, and risk should be properly managed. With the aggressive run-ups these stocks have seen pullbacks are always a possibility so support levels and trendlines can be used to control risk and set stop levels.

No comments:

Post a Comment