Two potential trade ideas to keep an eye on

This article looks at two companies that have formed potentially bullish chart patterns and could provide excellent breakout trades. They also look attractive from a longer-term investment perspective thanks to decent dividend yields.

The charts of the two companies shown below both depict similar price action. The stock price of both companies rose strongly for several months and then entered a multi-month consolidation during which they have traded sideways bouncing between support and resistance (blue lines)

The first company is HCP, a real estate investment trust (REIT) which serves the healthcare industry. HCP has twice challenged overhead support but failed to breach it. However it is once again nearing the top of its trading range.

A breakout through overhead resistance at around $46.75 would be bullish for the stock and would represent a decent potential entry point for those looking to go long the stock.

A 1 year daily chart of HCP, Inc. (NYSE:HCP) (Click on the chart for a larger version)

A 1 year daily chart of HCP, Inc. (NYSE:HCP) (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

Those looking for a longer-term investment should note that HCP has a dividend yield of 4.3% and has increased its dividend payout for each of the past 27 years. As a result HCP is the only REIT to be included in the S&P 500 Dividend Aristocrats Index.

The second company to keep an eye on is Kimberly-Clark whose familiar products are sold under brands, such as Kleenex and Huggies. Although its pattern is not as clearly defined as HCP’s, Kimberly-Clark has also traded in a range for many months, testing overhead resistance on multiple occasions.

Again, a decisive breakout above $87.00 would likely provide a nice entry point for both traders and investors alike.

A 1 year daily chart of Kimberly-Clark Corporation (NYSE:KMB) (Click on the chart for a larger version)

A 1 year daily chart of Kimberly-Clark Corporation (NYSE:KMB) (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

Kimberly-Clark has a dividend yield of 3.4% and between 2004 and 2011 it increased its dividend by an average of 9%. The company also has a low beta of .32 which means that it is considerably less volatile than the S&P 500.

Leave a Reply

Your email address will not be published. Required fields are marked *

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>