MERC is Breaking Out Today
Mercer International (MERC) is a low-priced stock that is acting like it is under accumulation by the BIGs, and there may be an opportunity to profit. MERC's earnings estimates are 156% this quarter, and the company is projected to have growth of +200% for the next quarter (source: Yahoo finance). Earnings growth is a major factor in attracting interest from investors, especially the BIGS.
Generally, stocks priced under $10 should be avoided due to lack of institutional buying. Once the BIGs start buying up shares, the price begins to rise, and it usually surpasses the $10 level not long after. MERC crossed above $10 last Friday, and today it is breaking outside a cup consolidation pattern. It's also hitting a new 6-month high.
Above is an intraday chart of MERC on 1 July 2014. The daily pattern is a cup with support established in early June. A +DMI crossover high set this stock into motion with a new swing high, and price has continued rising. Price broke above the left side of the cup today.
Generally, the entry on a cup pattern is just above the left side of the cup ($10.54). If there is a cup "handle" in the upper half of the cup pattern, the high of the handle is preferred. In the example above, the handle was in the lower half of the cup.
If the breakout is missed today, the stock can still be entered within 2-4% of the breakout price. Some breakouts will come back to retest the resistance line for support, and this can provide another potential entry point.
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