Goodyear Tires (GT)

Market Cap: 7.8B
Average True Range: .72
Beta: 2.26
Forward P/E: 8.11
Sector: Consumer Goods- Rubber and Plastic
EPS Growth This Year: 287%
EPS Q/Q: 456.5%
ROE: 98.4%
P/S: .44

Goodyear Tires looks ready to move higher after forming a substantial base pattern at multi-year highs. The stock is cheap. It has pulled back roughly 15% off its recent 52-week high and is retesting the upper range of its base.

EPS is growing rapidly and the Forward P/E is just above 8. Price to Sales is .44 and PEG is .27 suggesting much more room to grow fundamentally.

While the stock has shown some recent weakness I believe that to be short lived and should be ready to resume higher from here.

Looking at the 8-year weekly chart, we can see that the stock is near its 2007 high and has cleared the key 61.8 Fibonacci retracement level, which often acts as strong resistance. Typically when this level is broken to the upside the prior highs will act as a magnet, pulling the price toward it.

Zooming in on the same weekly chart, price is retesting the upper range of the prior base. As polarity teaches us, prior resistance should become new support. The $28 level acted as a strong ceiling for prices for more than a year. The stock finally broke through on strong trading volume in early spring and is now going through a typical "throwback" type pullback.

I also like that the rising 20 WMA has caught up to price and is meeting it right at this critical retest area. When looking for favorable risk/reward setups I like to see a confluence of support at the same level.

It should be fairly easy for GT to at least retest its prior swing high near $37. This presents initial upside of more than 25% from current prices. With stops less than 6% away from the entry point it sets up to be a great bet to make.

The stock is cheap, growing earnings rapidly and a breakout is in motion. All things I look for. We will place our initial stop just below the breakout level and at the prior pivot low at 27.23 on a weekly closing basis.