With a cycle low expected to be seen this week as well as a very oversold condition in the indexes, all mentions this week will be purchases. Nonetheless, the purchases are all in stocks that have been successful in staying above previous support levels and that are at prices where a successful retest of the lows can be expected to be seen if the stocks close higher next week. Risk/reward ratios on these stocks are also quite good.

NUAN (Friday close at 7.99)

NUAN is a company with unlimited growth potential in an emerging technology sector (voice recognition). Once the economic ills the market is suffering from are assuaged this type of company is likely to lead the way up. In addition, the company is the leader in its industry and has shown positive earnings growth even under these trying conditions. The stock broke down 73% in value, as many other stocks did, when the market plummeted this past year. Nonetheless, once a strong support level was found, the stock corrected back upward and has generally held on to its strength even though the indexes have made new lows.

NUAN is one of a handful of stocks that up to now had not tested its previous lows made in November. Nonetheless, in most every instance where a major drop has occurred and a downtrend exists, re-tests of the lows are necessary before a stock can begin an upward trend. With the recent weakness seen in the indexes the stock now finds itself nearing strong levels of support where a successful retest of the lows can occur.

On a weekly closing basis, support is strong at 7.51 and major at 7.20. On a daily closing basis, support is also very strong at 7.51 and major at 6.50. On a weekly closing basis, resistance is decent between 9.18 and 9.40 from 3 previous weekly closes in that area as well as from the 20-week MA. Above that level there is a strong resistance in the way of a double top at 11.04. Should that level get broken, there is decent resistance at 12.25 from a previous minor high close at that level as well as the 200-week MA. Major resistance will be found at 13.46 from a high that lasted for almost a year as well as from the 50-week MA. On a daily closing basis, there is decent resistance at 9.15 from a previous high daily close as well as at 9.40 from the 100-day MA. Above that level resistance will be strong between 11.04 and 11.27 from the highs made during the last 5 months.

A few days after major lows in the general market were made, back in November 17th, many stocks saw a gap opening in their charts, as it was widely believed at the time that a major low had been made. Gap openings are often seen at the end of a trend. With the resumption of the downtrend in the indexes, most every stock with a breakaway gap has seen the gap closed and in many cases new lows made.

NUAN is one of those stocks that neither has happened as of yet. Under conditions such as we are presently occuring, all gaps are meant to be closed, and it is likely that the stock will also see its gap between 7.58 and 7.80 closed. Nonetheless, the support that is found in NUAN between the 7.20-7.50 level is of such strength that once the gap is closed, it is likely the stock will begin to move up, especially if my evaluation of the indexes finding a temporary bottom this week comes true.

Purchases of NUAN between 7.20 and 7.52 and placing a stop loss at 6.84 and having an objective of 12.27, will offer a risk/reward ratio of at least 6-1.

My rating on the trade is a 4 (on a scale of 1-5 with the strongest probability rating being 5).

KO (Friday close at 39.10)

KO is a world-wide company that has reached levels of support that go back 12 years and due to is popular world-wide demand as well as the low price of its product, is unlikely to break long-term major support as other companies have done.

Since 2003 KO has held itself above the $40 level, on a monthly closing basis, as if it is a stone floor. Such a strong support base needs to be respected until such a time it is proven otherwise. In addition, if the indexes are close to a cycle low this week, as it has been stated by a few technical analysts of note, KO is one of those companies that is likely to receive a healthy dose of buying interest.

On a weekly closing basis, support is very strong between 37.70 and 40.09, with 3 major low closes in that area (37.70 - 2003, 38.90 - 2004, and 40.09 - 2006). On a daily closing basis, support is very strong at 37.07 (2003), at 37.85 (Thursday of this week), and at 38.65 (from 2004). On a weekly closing basis, resistance is minor at 42.79, a bit stronger at 43.85, and strong at 45.05. Major resistance is at 46.87 from the highest weekly close in the last 5 months. On a daily closing basis, minor to strong resistance is seen at 39.73 (most recent high daily close as well as psychological resistance). Above that level decent resistance is found at 41.07 from previous lows as well as from the 20-day MA, and 43.86-44.39 from the highest daily close recently, as well as from the 100-day MA.

The support shown on the monthly closing charts at $40 is very strong and its likely that if the indexes do find support this week that the stock will not only hold that level but generate some kind of a rally. It seems safe to assume that the only way the stock will break this major support would be if the indexes go substantially lower from the present levels. As such, purchases of KO on intra-day/intra-week dips below $40 should be considered strongly. With the probability of the indexes finding a bottom this week, the stock offers a buying area that has proven to be strongly supported in the past.

Drops back down to the test the recent lows at 37.44 are probable, as the break of support at 41.07 has put the stock on the defensive. It is even possible that a new low will be made and the 2003 low at 37.07 will be tested.

Nonetheless, these drops in price seem to be a good opportunity to pick up a stock below its major monthly support level. Such an opportunity offers clearly defined risk/reward ratios and a high probability of success. If my evaluation is correct and the support levels hold up, rallies up to the $45-$47 level are probable. Nonetheless, it is difficult to imagine much more to the upside as the resistance at that level is strong and copious.

Purchases of KO between 37.85 and 37.95 and placing a stop loss at 36.92 and having an objective of 43.87, offers a risk/reward ratio of 6-1.

My rating on the trade is a 3.5 (on a scale of 1-5 with the strongest probability rating being 5).

PKX (Friday close at 52.11)

PKX is a Korean company that is in the steel business producing everything from nuts and bolts to steel structures for oil and gas drilling. This stock reached a high in $201 in Oct07 and recently (October) dropped all the down to the $40 level. Nonetheless, over the past 4 years, since the stock broke above a 10-year trading range between $10 and $45, the $50 level seems to have become a major pivot point for the stock. It has also become a strong support/resistance level depending on which side of $50 the stock is trading at.

Over the past 15 years, since PKX has been in existence, the stock has shown an affinity for sideways range trading. Of course the time the stock traded up to the $200 level was an exception. Over the past 6 months the pattern has been much the same as it has generally traded between $50 and $75, with one exception to the downside with a drop down to $40 and one time it rallied up to $81.

On a weekly closing basis, support is major at 42.79. Nonetheless, support is also strong at the $50 level from a 1-year period back in 2006/2007 as well as from the previous week's close at 50.17. On a daily closing basis, support is major at 42.76 and again at 43.34. Strong support is also found at a recent low daily close at 47.14. Minor support is found at 51.36. On a weekly closing basis, resistance is minor at 53.31 (from a previous low close) and decent at 61.60 from another low close but of more consequence. Some resistance will also be found at 62.50 from the 20-week MA and major resistance is seen at 74.81 from the most recent high weekly close. On a daily closing basis, resistance is decent at 53.68 from both the most recent high daily close as well as a previous low close of some importance. Above that level, resistance is decent at 59.38 from a previous high close and much stronger as the stock gets up to the $61-62.50 level where MA's of consequence are found.

PKX closed higher this week than last week and that made last week's close at 50.17 into a successful re-test of the strong psychological support at $50. In addition, it is impressive that the stock was able to move up on a week that the indexes broke down. It must also be mentioned that over the past 5 months the stock has been able to build a well-defined up-trend on the weekly chart with low weekly closes at 42.76, 43.34, 47.71 and last week's 50.17. Such an up-trend seems to suggest the stock is ready to move back up to the top of the trading range at $75.

The stock has now shown a successful retest of the lows on the weekly chart and if the indexes start moving up this week, as I anticipate they will, PKX is likely to generate a move up toward the top of the established trading range at $75. Nonetheless, there is an open gap between 59.98 and 64.48 that is going to act as strong resistance, especially since there is also a previous high of some importance at 59.70. The gap 3 weeks ago was caused when the Asian markets took a strong plunge down in prices. It is unlikely that PKX will be able to get above that level unless the indexes, both in the states and in Asia, generate a rally.

Picking an entry point, objective, and stop loss point does present a bit of a problem as drops back down to the $50 are possible but not necessarily probable. In addition, placing a stop below the most recent low at 47.09 seems the right thing to do, but if the stock drops back down that much, it is likely to be in trouble. In addition, a rally back above the gap level at 59.98 will be dependent on what the Korean Kospi does. Therefore, the entry point, stop loss point and objective will be tenuous at best.

Purchases of PKX between 50.01 and 50.58 and placing a stop loss at 49.15 and having an objective of 59.98 will offer a risk/reward ratio of 6-1.

My rating on the trade is a 3.5 (on a scale of 1-5 with the strongest probability rating being 5).

FTEK (Friday closing price at 7.48)

FTEK is yet another company that established a major low in November and had not gone back to retest the lows until this past week. Nonetheless, with the drop down to the $7 level, it can now be said that the stock has done enough to the downside to establish a successful retest of the lows if the stock can rally from here.

FTEK is back to the breakout level the stock had back in 2005 when it broke above a 4-year trading range between 2.75 and 7.25. Under the economic conditions presently in existence, a drop back down to that price had to be expected. Nonetheless, the company provides a service (optimization of combustion systems and air pollution control) that is needed and will continue to be needed in the future, regardless of how the economy fares. As such, the previous level of resistance should offer good support.

On a weekly closing basis, support is very strong at 7.25 from the lowest close in 4 years as well as from the highest close between 2001 and 2005. On a daily closing basis, support is decent to strong between 7.42 and 7.55 and major at 6.84. On an intra-day basis, support is major down at 6.05 and strong at 7.01. On a weekly closing basis, resistance is minor at the most recent low weekly close at 8.81 and very strong at the most recent high weekly close at 11.29. Resistance will also be found at the psychological $10 level. On a daily closing basis, minor resistance will be seen at 8.26, decent at 9.24, and strong between 9.69 and 10.12 from many high and low daily closes in that area as well as from the 100-day MA. Above that, strong resistance is found at 11.29 and major at 11.99.

The 7.20-7.25 level has proven itself to be of major pivot point during the past 8 years and there is no reason to believe it won't be the same this time around. With the indexes possibly finding a temporary, if not major, low this week, it seem plausible to think that FTEK will be moving up from these levels. In addition the company's products are still in demand and more so because they can save companies money over their existing costs. As soon as the market has stabilized, it seems probable that FTEK's products will be aggressively purchased.

In November, when the rest of the market took a huge fall, FTEK was affected and saw an intra-day drop down to the 6.05 level. Nonetheless, in the past, as well as during the last 3 months, the $7 level seems to be the actual strong support. With the stock having dropped down to 7.05 on Friday, it is possible that the worst of the downslide is over.

Purchases of FTEK between 7.33 and 7.40 and placing a 6.74 stop close only and having an objective of at least $10 will offer a risk/reward ratio of 4-1.

My rating on the trade is a 3.5 (on a scale of 1-5 with the strongest probability rating being 5).