Tuesday, July 13, 2010

Stock to Watch: Merge Tech (MRGE)

Another stock from the June 25th collection of breakouts, Merge Technology (MRGE). On June 25th the stock emerged from a triple bottom (with a $2.81 neckline) on strong volume. It followed with a 'bull flag' that held support between $2.88 and $2.93. The 'bull flag' broke last week although Monday saw prices retreat back to $3.04 from $3.21 - but didn't drop far enough to invalidate the 'bull flag'.

Zignals Chart Image

Whether buyers will be willing to bid MRGE up should the broader market ease back after a series of tightening gains remains to be seen. The 'bull flag' low of $2.88 would need to hold to maintain the momentum of the two month rally from $2.00. As for upside potential, the breakdown gap from last November is a useful starting point.

I have offered a Trading Idea for a push to $3.49 with a stop at $2.88; alternatively - a Zignals Stock Alert can be set for a price cross of each.

Analysts have a 1-year consensus target of $3.60 with two 'Buy' and two 'Hold' recommendations. Analyst Northland Securities has a target of $3.80 called on May 19th when the stock traded at $2.27.

The stock also features in a trading strategy published by Igloo73 called "Current Low Cost Strategy" which costs $10 a month (a subscription buys you email signals and access to the full portfolio). This strategy is built around a pool of 48 stocks from which the current portfolio is holding 4 stocks. A summary performance of the strategy is given below; the strategy reports 55% winners and is up 3.6% YTD.

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