Why These 3 Stocks Could See Short-Term Upside

Costco Wholesale Corporation (NASDAQ:COST), FireEye Inc (NASDAQ:FEYE), and Gogo Inc (NASDAQ:GOGO) have all pulled back to significant trendlines

by Karee Venema

Published on May 21, 2015 at 3:35 PM
Updated on Jun 24, 2020 at 10:16 AM

Traders have many tools in their arsenal. Moving averages are one of the more popular indicators used because they help smooth out day-to-day price fluctuations -- and allow speculators to see if a trend is developing. Each week, Schaeffer's Senior Quantitative Analyst Rocky White routes an email highlighting a number of stocks that meet certain criteria, and have pulled back to moving averages that have proven their bullish significance over the past three years. This time around, Costco Wholesale Corporation (NASDAQ:COST), FireEye Inc (NASDAQ:FEYE), and Gogo Inc (NASDAQ:GOGO) all made the list. Here's a quick overview of the technical backdrops for COST, FEYE, and GOGO, and which sentiment indicators could also be ready to work in the stocks' favor.

Costco Wholesale Corporation (NASDAQ:COST)

COST has tacked on 26% year-over-year to trade at $144.31, and hit a Feb. 4 record peak of $156.85 along the way. Since tagging this notable milestone, the stock has pulled back to its rising 160-day moving average. In the six other times this signal has occurred, COST has averaged a 21-day gain of 4.2%, and is positive 80% of the time.

Option traders have been slow to buy into this technical strength, though, and at the International Securities Exchange (ISE), Chicago Board Options Exchange (CBOE), and NASDAQ OMX PHLX (PHLX), COST's 50-day put/call volume ratio of 0.93 ranks in the 78th annual percentile. Should the shares resume their quest for all-time highs, an unwinding of these pessimistic positions could help COST along the way. Looking ahead, the firm is slated to unveil its first-quarter results after next Wednesday's close.

FireEye Inc (NASDAQ:FEYE)

FEYE has been flying up the charts in 2015, boasting a more than 37% lead to hover near $43.30. In late February, the stock topped out at $46.44 -- its highest perch since April 2014 -- but has since pulled back to its 80-day moving average. In the two other times this has occurred, FEYE has gone on to average a 21-day gain of 13.6%, and has been positive both times.

There is still plenty of room on the security's bullish bandwagon. Of the 22 analysts covering the shares, half still maintain a "hold" or "strong sell" recommendation. Plus, the average 12-month price target of $47.50 stands at a modest 9.7% premium to current trading levels. The stock could get a fresh burst of buying power, should any of these holdouts follow in the recent footsteps of Evercore ISI, which took the bullish route on FEYE earlier this week.

Gogo Inc (NASDAQ:GOGO)

GOGO came within a chip-shot of taking out its April 22 annual high of $22.40 earlier when it topped out at an intraday peak of $22.25. The stock was last seen at $21.98, up 33% on the year. Helping lift the stock since early February has been its 40-day moving average -- a trendline that caught GOGO's most recent pullback. What's more, in the two other times this signal has flashed, the security has added 11.6%, on average in the subsequent 21-day time frame, and has been positive both times.

While call activity has been increasing in popularity of late, shorting the stock has been favorable for some time now. In fact, more than 34% of GOGO's float is sold short, representing 17 sessions' worth of pent-up buying demand. As the security continues its impressive run on the charts, there is more than enough fuel for a short-covering rally to ensue.

 


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