Tale of two charts

When looking for potential long candidates there are many things to consider. If you feel you must buy something then you are essentially gambling. As traders we are looking for opportunity buys only. Below are two charts that show two potential buys. Both have conducive price patterns as they have bounced off support. But only one is a worthy buy. Here is why.

In addition to price we look for other confirming indicators before we make a buy.

GG Goldcorp.

Goldcorp has been showing strength in our latest rally and has pulled back to support. So is it a safe entry? To answer that we can look at alternate indicators.


RSI is in the middle of the band. This is not itself bad, but it does not scream opportunity.

The MACD looks bad. We accumulation slowing and it drifting away from it's MA.

The Stochastic oscillator is also bad signaling more downside ahead.

External Factors: Goldcorp is a Gold mining company whose results are heavily dependant on the Price of Gold. Although not shown here, a chart of Gold show a bearish trend that is only begining to show signs of reversing. So Goldcorp is not an opportunity for us... yet. It may indeed go up. Strange things are happening in the Gold futures market that could have an effect on the future price of Gold. However until we see a more positive picture we'll pass on GG.



DRYS
Dryships is a bulk dry goods shipper who has gotten slaughtered. It has taken a 96% whack from well over $100 few months ago to $4.50 as of this writing. It's action lately though may provide a low risk buying opportunity. Like GG above we see DRYS bouncing off of support. We notice alternate indicators complement a bullish view.

RSI is coming off the sub 30 level which indicates support.

It's current price is low in the Bollinger Band

MACD indicators are drifting up


Stochastics indicate oversold levels


External Factors: This stock shows an excellent correlation to the Baltic Dry Index (not shown). This is an index of average shipping rates that shipping companies can charge for shipping goods. Shipping rates have plummeted over 90% taking all of the shipping companies with it. The massive slide in shipping rates seems to have found support as well. This is necessary for bulk shippers to rebound. Unless rates find a bottom there is risk of further downside. So it seems all factors point to a nice bounce from here providing the general market cooperates.

Always look for a low risk high reward entry.