ATHR Setting Up in Cup Base; Fantastic Fundamentals

With the stock market’s action suggesting it wants to go higher out of this current correction, you should have an active watch list of strong stocks once the market officially begins a new uptrend. I have found the best tool for deciding when to begin buying stocks again is the Big Picture found in the Investor’s Business Daily (IBD). Their methodology for tracking uptrends and corrections is a great way to get in and out of the market safely.

One outstanding stock setting up in a cup-shaped pattern is Atheros Communications (ATHR). It could go on to form a handle to the cup, which is the most powerful of chart patterns to buy off of. But for now, the buy point to the cup is $37.44 plus $.10 which makes the buy point $37.54. I only buy a stock once I see volume surge 50% on the day it breaks above the resistance level, which in this case is $37.54.

ATHR is showing outstanding fundamentals. It has 3 quarters in a row of accelerating earnings per share (EPS) and sales growth. Projections are for 733% EPS growth next quarter and over 100% sales growth. This is absolutely what you want to see in a leading stock.

At 14% return on equity (ROE), it’s a little shy of the 17% or more I’d prefer seeing, but it’s not bad. Institutional ownership has grown in the past few quarters, a great sign, and the relative strength (RS) line is at a new high – all fantastic. To top it off, it’s a leader in its industry group, which is running strong right now.

There’s much more to say about this company, but as usual, do your own background research. I have it on my watch list and am continuing with my research as I am deciding which few stocks I’d buy if the market enters a new uptrend.