Yahoo Finance Technical buy signal greenlight for Nu Skin, SeaWorld?
Oftentimes you hear pros talk about buying laggards for a game of catch up. But how can you tell if a stock, that’s been in decline, is becoming a buy?
One technique involves technical analysis, in which an investor analyzes stock charts looking for a meaningful reversal. According to Carter Worth, head of technical analysis at Cornerstone Macro, two stocks are currently making so-called bearish to bullish reversals right now.
“Never buy a stock in a downtrend,” explained Worth. “If it’s going down there’s something wrong with it. That’s important. What we’re looking for in a bearish to bullish reversal is, first, great weakness, but weakness that’s abating.”
Nu Skin
Looking at the chart of Nu Skin (NUS) you can easily see the downtrend. “But if you look at the trendlines you can also see, it has stopped going down and appears to be basing,” he said.
And he noted a bearish to bullish reversal should not be dramatic or ‘V’ shaped. Instead it should be somewhat flat, reflecting consolidation before a move higher. “You’re looking for a sign of healing.”
SeaWorld
Again looking at this chart, Worth said, “you can see a strong decline in SeaWorld (SEAS). But the stock has also bottomed for the better part of a year.
My presumption is that it returns to the ‘scene of the crime’ or the levels from which it fell. In this case I think there’s limited downside and plenty of upside.”
Get the Latest Market Data and News with the Yahoo Finance Ap
In both cases, Worth added that trends reflect fundamentals. “Typically to get into these downtrends something negative has happened. The business has faltered. Something went wrong. But good companies eventually work though their problems and when you see a stock form a base after a big decline, it suggests the problems have been stemmed.”
More from Yahoo Finance
Stealth signs of consumer strength emerges amid earnings
