11 Reasons to Buy These 2 Stocks

TD Ameritrade Holding Corp. (AMTD) and Akamai Technologies, Inc. (AKAM) broke below their lower Bollinger Bands, which has been a solid buy signal for stocks

Feb 14, 2017 at 2:23 PM
facebook twitter linkedin


The best "buy" signal since 2016 has been the Bollinger Band breach, as Schaeffer's Senior Quantitative Analyst Rocky White noted in a recent comparison of eight trading indicators. In the past year, stocks that broke below their lower Bollinger Band went on to average a one-month return of 2.92%, and were positive about two-thirds of the time. We asked Schaeffer's Senior Options Strategist Tony Venosa, CMT, to weigh in on a couple of stocks that recently broke below their lower Bollinger Band, and that look most attractive from a sentiment and price perspective. He singled out the shares of financial stock TD Ameritrade Holding Corp. (NASDAQ:AMTD) and cloud services concern Akamai Technologies, Inc. (NASDAQ:AKAM).

6 Reasons to Consider AMTD

According to Venosa, there are six reasons to consider AMTD, which is currently chugging higher with many other financial stocks:

  1. There's nothing bearish about the chart below, as the shares just recently closed at a multi-decade high, and are now up almost 60% year-over-year.
  2. AMTD is a good candidate for a "buy the dip" name. The shares broke below their lower Bollinger Band after Charles Schwab Corp (NYSE:SCHW) announced on Feb. 2 that it is cutting commissions on equities and ETFs.
  3. Huge volume spike last week could be indicative of a bottom.
  4. AMTD has been leaning on its 80-day moving average for support.
  5. Peak put open interest sits at the 42 strike, among options expiring Feb. 17 to March 3. This abundance of puts could act as additional options-related support in the near term.
  6. There's potential for upgrades, with 40% of analysts maintaining tepid "hold" opinions. 

Conclusion: Buy AMTD and use the Feb. 2 low as a stop-loss.

AMTD stock chart
Chart courtesy of StockCharts

5 Reasons to Consider AKAM

Venosa also outlined five reasons to consider AKAM:

  1. After three failures at the round-number $70 level, the shares gapped lower, breaking and closing below their lower Bollinger Band despite last week's stronger-than-expected earnings report -- which flushed out many weak long positions, as shown by the huge volume bar on Feb. 8.
  2. The stock's 120-day moving average could provide support, as there has been some significance in the recent past with this trendline.
  3. The strong upside gap area from AKAM's late-October earnings reaction could also be supportive.
  4. Short interest peaked in November, and continues to fall -- suggesting bears may continue to cover their positions, especially at current levels. At present, it would take roughly five days to buy back all the shorted AKAM shares.
  5. AKAM could also score upgrades, with 10 out of 21 brokerage firms maintaining "hold" or "strong sell" opinions.
Conclusion: Looking for a reaction move higher to test the $68 level; use last week's low as a stop-loss.

AKAM stock chart
Chart courtesy of StockCharts


Don't miss Schaeffer's free weekly stock market forecast. Sign up now for Monday Morning Outlook.


A Schaeffer's exclusive!

The Expert's Guide

Access your FREE trading earnings guide for Q3 before it's too late!


  
 
Special Offers from Schaeffer's Trading Partners