Thursday, July 15, 2010

Stock to Watch: Heartwave Int. Inc (HTWR)

The market outlook for today is at best, mixed. Individual stocks will find it hard in this environment to attract a bid, particularly if resistance is nearby to offer supply (as is the case for the Nasdaq). Going back through my breakout picks there is one stock which has enjoyed strong gains without (yet) going parabolic. Heartwave (HTWR) was one of the 31 breakout candidates from June 25th. The stock failed to push on from the breakout, but the subsequent pullback was on low volume and selling momentum has eased following an initial sharp drop. The stock is currently catching a bid around $65.

Zignals Chart Image

Bears might take a more skeptical approach and view the tight action around $65 as a prelude to a breakdown; in light of this I would be looking to use a relatively tight stop and have created a Zignals Trading Idea with a stop at $63.79 (you can get my trading ideas by email by following this link - free registration with Zignals required). Alternatively, set a Zignals Alert for a cross below $63.80. A break of $65 sets up the possibility for a move down to $60 and/or the longest serving trend support line currently just below $55.

Analysts give the stock a 1-year estimate of $74.83 which may suggest the stock has reached its (optimistic?) limit. On June 25th, Auriga USA set a target of $84 when the stock was trading at $74.18. If the stock was able to break $75 then the possibility for a measured move to $85 becomes a possibility.

Should today's action stay mixed then it's likely HTWR will spend another day around $65. However, all this narrow trading sets up tension for a sharp move - one way or the other.

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