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Kronos moving to front of line

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Late last week, we looked at a list of software stocks in our intra-day market commentary, which was sorted by price. Several stocks caught our eye as it related to bullish looking chart formations. One stock that was in that list is on the move today and looks higher still.

Kronos Inc. Chart -

Kronos (NASDAQ:KRON) develops, manufactures frontline labor management systems. Actually, I don't really care what they make at this point. The MARKET seems to like the stock and that's what interests me. I've place a fitted retracement bracket on the shares. Anchoring to the April 3rd low of $25.06, then fitting several points along retracement to try and ascertain what a market maker would be doing with his/her inventory and market making activities going past and present. The BIG volume undoubtedly to market makers attention from $46.67-$53.34 and this is where I think the inventory building phase took place. Institutions may have "loaded the boat" on the big volume spike and have been "topping off the tank" between $53.34 and $60. Now we're getting an upside move to relative highs and our next level of retracement resistance looks to be near the $70 level and serves as a bull's near-term bullish target. First sign of trouble would be a break back below the $53 level.

For many, the "fitted retracement" and upper level of retracement at $81 is questionable. We will note that the stock did trade $80 back in January 2000. Is there another tool in our technical trader's toolbox we can use to try and build some type of conviction toward the $80 level? Sure! Point and figure charts!

Kronos Inc. Chart - $1 box

Quick summary of the point/figure chart shows two bullish vertical counts. I like to look at a couple just to see if I'm on the right track. In early October, shares of KRON jumped on BIG volume and we see that column of X's (demand) surge from $40- $54, without a 3-box reversal and gave us a bullish vertical count of $85. Then in late October, the stock did give a sell signal at $54 (invalidating first vertical count), but today's trade at $62, has the stock back on a buy signal and giving us a spread-triple top. The current column of X's serves as the current bullish count of $82. Now we have two vertical counts that are indicating some type of potential bullish target in a range of $82-$85. Of course, stocks can exceed their vertical counts and they may never be achieved. However, the stock did trade the $80 level in its past history.

By using both point and figure charts along with bar charts and retracement, subscriber's now have some good levels to be looking to trade going forward. All along, measuring risk/reward to help control risk in their trading/investing accounts.

Not too distant past

Just last week (Friday) we mentioned shares of "chemical" Neogen Corporation (NASDAQ:NEOG) as a perceived "boring" stock. We felt subscribers should take a look at the stock from the bullish side as the point/figure chart was bullish and had just developed the "bullish triangle" pattern at $20.

Well... that stock has been on the move the past two sessions and now we can use retracement to help control the trade going forward. Subscribers will note this stock also has a rather lofty bullish vertical count, but that's what we like about it too! The bullish vertical count from point/figure chart indicated the potential for $53.

Neogen Corp. Chart -

Friday, in the 01:00 Update, we mentioned that the Chemical Index (CEX.X) had just triggered a triple-top buy signal and that it might be worth while looking for a bullish stock in the group that was a leader in the chemical group. We found Neogen (NEOG) having recently given a "bullish triangle" and felt the stock looked attractive at $20.83. Two day's later and 16% higher, the stock has made the NASDAQ Composite look like she's standing still. Using fitted retracement, bulls have hit an early bullish target of $23.49 and can now snug a stop up under today's low and let the stock continue to try and move higher. Yes, she looks overextended, stochastics have been overbought, but try telling that to somebody that's short at $22! Be kind to the bears in this one and give them some stock at $26 or when your trailing stop is triggered.

Jeff Bailey
Senior Market Technician
Option Investor

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