Happy Taco Tuesday! I have my eyes on two stocks that are showing signs that they may be ready to move higher.
I am looking at them through the lens of technicals and fundamentals to get a better sense as to what the opportunity could be with each company.
This materials and manufacturing company has my attention because it is defending a key area of support, the 50-month (yes, month) moving average.
During prior occasions when it has defended this level it's often rallied quite meaningfully. The stock remains in a healthy longer-term uptrend after this recent price reset as well. Short-term this appears to be an opportunity to enter in hopes of the longer-term support holding.
The biggest near-term risk that I see on the radar is earnings on July 25th, so I'm not likely to put on a full position, but I might get my feet wet with a starter and build that position post-earnings.
In terms of upside potential, I would look for a rally to about 192 and be happy to take my profits there if we get there. Otherwise I only would want to be in this trade for about 2-3 months and would exit if it is not performing.
I would manage risk by exiting if price closes meaningfully below the point of control at 170.
Avery Dennison's product portfolio is quite diversified across a number of key products that tend to have sustainable demand, such as labels, packaging, graphics, medical products, polymers, and more.
The company did experience negative top and bottom line growth in late 2022, but it appears to be heading in the right direction if estimates are any guide.
It's not the most exciting play, but it is an integral component of the economy that seems to be on the rebound with business segments that can potentially weather a slowing economy more durably than more discretionary companies.
This oil and gas operator seems to be putting in a rounded bottom and is breaking out of a descending triangle. The stock has been coiling up for some time and it seems like that energy is set to be released to the upside.
Zooming out we can also see that we have broken above the point of control and a descending trendline, giving us room for further continuation.
I would be inclined to stop out with a close below the 8-week EMA or declining trendline. Otherwise my upside target would be $19.79.
We do have earnings coming up on August 17th, so I would not want to be in a large position at that time. For that reason I would only begin my scaling in here into recent strength, and add to the position if they beat expectations and the stock continues to move higher.
I would look at keeping this trade on for about three months. If it hasn't reached my price target by then I would exit and look for other opportunities.
The company operates within the US, in the Permian Basin region. That means there is low geopolitical risk and lower natural disaster risk as there aren't often hurricanes that impact this region.
From a fundamental perspective, like Avery Dennison, Earthstone Energy also saw a significant slowdown that it seems set to work its way out of in the quarters ahead.
This is an environment where I am more interested in exposure to companies that have strong, growing earnings trajectories which have been recovering from recent weakness. The recovery could allow an upward re-pricing of risk.
Each company listed appears to have favorable technicals and fundamentals and the potential to continue moving. But always be aware of earnings as a risk. I don't ever want to be full position long or short right before earnings.