Monday, March 29, 2010

RIMM, OCLR Broke Out... DPZ Next?

Well, buying RIMM (Research in Motion) on the breakout at $71 worked like a charm. I am still sitting on the June call options at $70, with 40% gain. So far so good, but it is being taken down AH today on the rumor that Verizon may carry iPhone. (Rats....)

There's another stock I bought recently on the breakout, and that's working too. The stock is OCLR (Oclaro Inc.), which I bought at $2.10. It is hitting a resistance around $2.80, but I am sitting with 33 gain in 3 weeks. Don't ask me what this company does for business. I bought it after looking at the chart. $2.10 was a breakout point

As far as I am concerned as a trader, when you buy a stock on the breakout and the breakout doesn't fail, then the stock market is more likely to be in a bull market than a bear market. Mind you, it's just about the stock market, and NOT the real (by that I mean productive) economy or what's going on on Main Street.

Some junk food (or comfort food, if you prefer) companies are about to break out, probably to the upside, the general market willing. One of them is PEP (Pepsico), the other one is DPZ (Domino's Pizza). Both seems to be consolidating, forming a flat top after having made a significant increase already.

I like DPZ's chart better. It has had similar breakouts from a flattish base twice since last December, and each time those breakout points were never undercut. Could it happen the third time? Looking at the longer-term chart, the stock is at the same level as in August-September 2008, right before the stock market crash. If this level is somehow taken out, the next resistance is $18 - 20 area. If it breaks down below $13.35 (lower support of the current flat base), I can forget about it.

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