The One Stock I Would Consider Buying In This Market
As the old Wall Street saw goes, "There's always a bull market somewhere."
These days, with the stock market faltering, you might think that can only mean inverse ETFs. But even in bearish times, there are still stocks that can and do move higher. After all, even during the Crash of 1987, several dozen stocks on the New York Stock Exchange gained ground.
That's why it always pays to keep an eye out for stocks with healthy charts, even in a sick market. One that I like right now is for-profit hospital operator HCA Holdings (NYSE: HCA ) .
It was a rough first few weeks of the year for the broader market until, on Jan. 20, it suddenly reversed to the upside. The Dow Jones Industrial Average was down as much as 565 points intraday, but closed just 249 points lower. The media reported the net loss but the charts told a different story -- one of an oversold market with extreme fear staging an intraday comeback.
HCA's price action that day was not quite as dramatic, but it still ended with a nice intraday turnaround. It also formed a weekly reversal pattern right at a nice long-term support level.
In the daily time frame, the chart shows a three-month trading range as HCA kept pace with the broader market.
However, in December, the relative performance chart started to move higher. In other words, even though HCA was moving sideways, it was doing better than the market, which was starting to weaken. By the time of the bullish reversal, the stock had already scored a relative performance breakout, putting it on track for an absolute price breakout.
Some may say that breakout happened on Tuesday as HCA logged its highest close since October. In the current market environment, though, I would err on the side of caution and would rather the stock clear the highest point in the trading range at $72.10.
Still, with the Dow spending most of Tuesday deep in the red, HCA's positive action that day -- breakout or not -- was bullish as good action on a bad market day is a sign of strength.
So too is the sudden upturn in on-balance volume over the past two weeks after falling since summer. Normally, price action follows indicators when the two do not agree. Therefore, we must conclude that something important happened on the reversal day to change the indicator.
There are other positive technical factors including a bullish crossover in weekly Moving Average Convergence/Divergence (MACD) -- a momentum indicator. And HCA is now solidly above the 50-day moving average, which looks to be turning slowly up.
For those looking for even more reason to consider the health care stock in a weak market, the current trading range takes place at the 38.2% Fibonacci retracement of the stock's bull market since 2011. That tells us that last year's decline likely did not break the stock, but served more as a correction -- albeit a large one -- in an otherwise healthy trend.
I do not expect HCA to recover its entire 2015 loss in a time frame that is suitable for traders. But based on the height of the trading range projected up from the presumed breakout point, I think it will be able to reach the $82 area in the near term. This is also a resistance area defined by several turns and congestion zones from last year.
So, if the stock breaks out from the trading range with a move above $72.10, traders could book a 14% profit in a matter of weeks.
Recommended Trade Setup:
-- Buy HCA on a break above $72.10
-- Set stop-loss at $68.50
-- Set price target at $82 for a potential 14% gain in five weeks
Note: If you're looking for even bigger gains, you could make a 67% profit on that 14% move by risking just $1,020. To find out how, follow this link .
This article was originally published on ProfitableTrading.com: The One Stock I Would Consider Buying in This Market
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