50 MA Bounce Candidates (SBUX) (CREE)

If the market scores another ugly session we’re not interested in buying anything and will simply continue to manage, and likely prune, our portfolio of longs.

But if the market rebounds there are two stocks in particular that are on our watch list for long entry, both off their 50 MA’s.

Starbucks (SBUX) is a stock we previously profiled coming out of a pseudo “short stroke.” While not the world’s greatest trade it yielded 19% over two months. We feel it can do even better on another leg higher given the turnaround in progress at the company. Sales growth has lagged but a recovering economy should help that problem.

SBUX is pulling into its 50 MA for the first time since its break out move. Provided the market stays in an uptrend this is almost always a buyable event. We don’t like the volume in the stock yesterday, which smacked of distribution, but in a market that’s acting correctly we’d take entry on a reversal at or near the 50 MA. We’d like to see a robust volume bounce to justify holding the position.

Another stock in the exact same position as SBUX is CREE (CREE). Here’s a stock we haven’t profiled before. It gained over 25% after breaking out of a first stage base in July. CREE’s focus these days is on its commercial LED lighting products, which require far less power than traditional lighting and are thus well suited for our age. While earnings and sales have been spotty that’s changing as CREE hits the “sweet spot” of their product cycle.

CREE looks a bit better technically than SBUX, having already bounced off its 50 MA on volume.

Again, these are purchases for a healthy market. Odds of success are sharply reduced in a market that has lost its ballast.