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Mar 11

Long HCA Holdings ($HCA)

From scouring this weekend’s IBD newspaper I noticed 7 of our 25 longs were in the top 50 list. I’m always encouraged to see any holdings in there, as although I don’t follow their method start to finish, I know anything on the list has survived an excellent screen, as you know it requires a company to have solid fundamentals with strong earnings growth and be technically sound with good relative strength.

Now, we’re about to make it 8. There were two charts that stood out to me. One was Visa ($V), which we already have, and is set up very strongly for a resumption of its uptrend, and the other was HCA Holdings ($HCA).

$HCA operates 162 hospitals in the US, and after halving in price in the six months after coming to market 2 years ago, has since staged a steady recovery to all time highs.

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It may not be the most efficient looking trend, and it’s taken great liberty with its 10wk line every time it’s tested it, but on price alone it’s the very definition of an uptrend, higher highs and higher lows. I also like how within that pattern when breaking out from a consolidation it’s often come back to test it before resuming higher.

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The last such instance is where it gets interesting. For the last three months of the year it was held below $34, making 3 attempts to break through. When the move finally came in January it didn’t look back, and just for good measure took out the post-listing all time high too.

This then has created a very solid area of potential support. The levels it’s respected and got history with are clear.┬áThe recent upside volume that accompanied the rally of the last two weeks is very encouraging, but given its volatility don’t be surprised if we get one more test of support.

As a long-term trend follower I like to give stocks like this some room in order to catch a much bigger move. I’m not sure we even need the moving averages here, if it has another downside test we know exactly where it’s going. I’d happily get long here, and use a clean break of that $33.76-$33.87 level to invalidate the uptrend.

 

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