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Mar 26

Corning ($GLW) Set To Emerge From 18-Month Base

We’re adding a long in Corning ($GLW) to our portfolio this morning. This is a stock that doesn’t fit the pattern of many of our longs, it’s not already in an established long-term uptrend, but its price action on a short-term and intermediate basis suggests it could be in the early stages of a very strong move.

Here’s a weekly chart of the last 2 years.

AlphaCapture

The stock made a marginal new low in summer of last year, and then rebounded from that same level in November to form a double bottom. In the last month the 10wk has crossed back above the 40wk reflecting the recent upswing in momentum.

As we’re dealing with a stock in the very early stages of an uptrend, it’s also useful to look at any divergence that existed at the recent lows. In the chart below of the same period, I’m using a method taught by Jake Bernstein. We can see that MACD and Momentum bottomed along with price back in Sept 2011, and continued to rally while price made a new low over a year later. Only now is MACD surpassing the highest point within that divergent period, triggering a buy signal.

AlphaCapture

However, it’s in the daily chart below, where we can see the entire move from the November low, and the three previous occasions $GLW has toyed with the $13.00 level, that it gets really interesting.

AlphaCapture

In the last 2-3 weeks a lot of positive developments have transpired. We have a confluence of accumulation days, rising on increased volume, the two biggest of which produced the highest weekly close since October, and a significant breakout of the $13.00 resistance area.

This has put in place a series of higher highs and higher lows, with the 20,50,200-day MA’s all aligned and rising. Additionally, in the last 3 days we’ve seen a tight flag-like consolidation of the breakout, suggesting a near-term resumption of the uptrend.

A clean break and close below the last pivot low of $12.29 from 2/26, would suggest $GLW is tracing out a more complex basing pattern and would see us exit. That’s about 6% away and makes this a good risk/reward trade.

 

7 comments

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  1. Ken Lee

    I would short this stock anywhere above $13.23 with a stop at the pivot high at $13.95. (double bottom will be confirmed at that level) Target to the downside is $10.7. I believe the longer term momentum will win out, 200 day is firmly down.

    1. Jon Boorman

      The 200-day is less than 1% from where it was 2 months ago, and in the last few days has just turned up. It would be higher still were we to get to your levels of $13.23 and $13.95, so I’m not sure citing the 200-day makes sense for a short rationale, unless price were to break back below it.

  2. Ken Lee

    Just different styles around the 200 day. I agree that a short entry below it is less risky, but if you consider the general gradient of the longer term line, short entries above the 200 day can be effective too, e.g. GLW on 4/30/12 and again on 10/17/12. The price action on GLW since the November low does not seem impulsive. I could be wrong – I frequently am :-)

    1. Jon Boorman

      With hindsight I can pick the perfect place to short too.

  3. Ken Lee

    Study the past. What’s past is prologue.

    1. Jon Boorman

      Yes, exactly. Study the past. Not study a carefully selected sample size of 2 to support a fallacious argument.

  4. Ken Lee

    For my rules, a study of the past two years of price action in GLW produced three shorting opportunities, two of which were above the 200 day on the dates that I gave above. I am wrong c 30% of the time, but with good stops, I can keep the losses small and let the winners run. Best of luck in the trade. Still expecting to short this tomorrow if it gets above $13.23.

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