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Clearwater Seafoods needs to push past $8.20 with conviction

An employee pulls out a live lobster from the holding tank at the Clearwater Seafoods store on the Bedford Highway in Halifax in this file photo taken onNovember 12, 2007.

Paul Darrow/For The Globe and Mail/paul darrow/The Globe and Mail

Hi Lou,

I'm a Herring-choker looking for your opinion on Clearwater Seafoods. Always appreciate your insight!

Cheers,

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George

Hey George,

Thanks for the assignment and your kind words! Always appreciated!

This will be the second time that I interpret the patterns concerning Clearwater Seafoods Inc. The last time was on Jan, 13, 2013, when the shares were trading for $4.85. Mario wanted me to have a look at the stock and the research indicated that the shares were overbought and that we could expect a pullback. The shares were coming off a 52-week high at $5.30 and the MACD and the RSI were signalling a sell.

Retrospectively that was the right call as CLR pulled back to $4.00 by the beginning of February 2013. By June of 2013 the shares started a new leg up, breaking above resistance at $4.50. Another exploration of the charts will help inform my opinion of this investment opportunity.

The three-year chart outlines the healthy advance that drove the shares to a 52-week high of $9.21 by February of 2014. The retreat has tested support along the 200-day moving average where it caught a bounce. What is evident is that the bounce has met resistance near $8.20 which has to be overcome if we expect to see another leg up. In addition, make note of the breach of the uptrend line.

The six-month chart illustrates the top in February and the sell signals generated by the MACD and RSI as the shares retreated to support along the 200-day moving average near $7.00. The bounce took us to $8.20 where resistance is preventing further gains. At the time of this post I would advise that you take a trading posture with CLR. Find entry and exit points until certain issues are resolved.

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What we need to see is a sustained advance. The resistance along $8.20 needs to be overcome with conviction and the leg up that came off the test of the 200-day moving average has to be extended. Watch the momentum indicators for buy and sell signals.

Make it a profitable day and happy capitalism!

Have your own question for Lou? Send it in to lou@happycapitalism.com.

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