Time Warner (TWX)

Market Cap: 72.8B
Average True Range: 1.16
Beta: 1.19
Forward P/E: 15.32
Sector: Entertainment Diversified
EPS Growth This Year: 24.30%
EPS Next Year: 23.71%
EPS Growth Past 5-year: 20.20%

Time Warner has been displaying very positive price performance recently and I believe TWX is on the verge of a big breakout move. We all know their content is premium quality and with HBO spinning off into an individual subscription service presents an interesting opportunity for growth in the near future.

The company's growth metrics won't blow your skirt up, but they have been consistently steady and seem poised for greater upside in the near-term. Time Warner has grown EPS by 20% for the past 5 years and is projected to continue into 2016. As we have seen recently, the opportunity exists for TWX to be a strong buy-out candidate as well. At current valuations it makes an attractive target for companies needing a boost to the bottom line.

The stock has been trading in mostly a sideways range since late 2013. Apart from the "Fox bid" surge in July of last year, it has mostly been working off the tremendous rally from the '09 lows. Recently we have seen the stock trade against the high end of the buy-out offer level, and just this week is making new 13-year highs.

I believe the recent trading behavior, acquisition support, and HBO subscription service make TWX a very good bet for out-performance for at least the next year. Simple range calculations suggest initial price targets in the $108 area, but on a percentage basis much more upside could exist.

TWX Monthly

 Here is a look at the monthly bars going back to the 2000 crash. The stock then went on to create a lower low during the '09 financial crisis, but has since broken through the swing high near $60. This is classic "Double Bottom" behavior and the breakout has seen substantial follow-through away from the prior range.

 TWX Weekly

Zooming in on the last 2+ years, the stock has continued to increase in value yet has been consolidating tightly for the better part of the last year. Each time that price has approached the highs at $87 the stock has fallen back. Yet on each successive test buyers have come in sooner and sooner creating an Ascending Triangle formation.

A setup like this has a higher than average probability of breaking out to the upside and creating a strong move away from the coiling formation.

 TWX Daily

Looking at the daily bars, the stock broke out to new 13-year highs yesterday. This coiling price action can create explosive moves in the direction of the breakout and I think this instance is no different. The trading ranges within the triangle have gotten tighter and tighter as time has gone on.

Periods of low volatility tend to be followed by volatility expansions. I believe TWX is on the verge of such a move right now. For risk purposes we will be using the daily swing low at $82.20 as our stop and will size our holding according to that risk. The Risk/Reward sits favorably here as we will be risking $6 with initial targets of $20 higher. I believe the 108 target is modest and that this stock could continue higher from there. But this still sits at a greater than 3-1 reward to risk using these initial projections.

HD Supply Holdings (HDS)

Market Cap: 6.70B
Average True Range: .69
Forward P/E: 13.30
Sector: Industrial Equipment Wholesale
Sales Growth Q/Q: 6.1%
EPS Growth This Year: 98.50%
Price to Sales: .74
EPS Next Year: 30.26%


HDS Daily

HDS has seen two high volume breakouts out of sideways trading ranges recently. One in late March and one recently coming last Tuesday after beating earnings estimates. Growth is strong here as the company has been growing EPS over the last year and it is expected to continue next year as well.

HDS Weekly

The weekly view shows just how resilient the stock has been since breaking out in March. While the market has been quite volatile, HDS has worked its way steadily higher in an orderly manner. Stops will be placed just below the recent range support at 32.22. This is also the weekly closing low from 5/15. A break of that low would signal more consolidation is needed an we would likely want to step aside.

Relative Strength vs SP500

Here is where the stock really impresses me. Relative Strength vs the SP500 has recently broken out of an 18-month base and has been outperforming since. The stock is now making new relative highs and appears poised to lead. The MACD also shows strong trending behavior and appears ready to make new highs.

Relative Strength is strong, trend health continues to point higher and valuations are very reasonable. This makes HDS a solid candidate to outperform over the next 12 months and possibly beyond. As always though we manage risk first. Should the stock turn against us we will take measures to protect our capital.

IPG Photonics ($IPGP)

Market Cap: 5.09B
Average True Range: 2.33
Beta: 1.86
Forward P/E: 19.31
Sector: Semiconductor Equipment
Sales Growth Q/Q: 16.60%
EPS Growth This Year: 27.60%
EPS Growth Q/Q: 40.30%

IPGP is an Investors Business Daily Top 50 Stock. They display tremendous growth metrics, no debt, strong margins and ROE over 20%.

The Stock has been a big winner since the '09 lows, gaining 1600%. IPGP has recently broken higher from a 4-year Ascending Triangle formation at all-time highs. Buying volume expanded on the recent breakout and has now consolidated sideways since March.

The recent consolidation has come on reasonably low volume indicating modest profit taking vs distribution. All timeframes are aligned and bullish on the Monthly, Weekly and Daily.

With the Semiconductor space seeing strong rotation recently, IPGP positions to take advantage of any further strength we might see in the market.

IBD's William O'Neil says you want to own the highest quality growth stocks while the market is healthy. This is where you find big market winners. Should the market continue to cooperate, I believe IPGP is a strong candidate for out performance over the next 6-12 months potentially.

MONTHLY

WEEKLY

DAILY

I really like the structure of this large base breakout followed by the resilient consolidation above that breakout level. I like an entry in this area with stops below the weekly closing low from 5/1 at $90.60
Here is a zoomed in view of that stop level:

A weekly close below 90.60 would be the lowest weekly close in the last 15 weeks and would force me to reconsider my bullish posture.