When you spend your days dissecting countless stocks, you sometimes stumble upon small groups of similar companies having their own private bull market.
Often, the momentum can be traced back to an obvious catalyst �� fundamental improvements within the group or a well-publicized buyout in the sector. But sometimes, investors and traders trigger a furious rally pinned on nothing but the simple fact that a stock has started to move in their favor. The buying triggers even more buying �� and the rally begins to feed off itself.
I've chronicled several interesting rallies over the past few years, ranging from coffee stocks (slightly absurd) to semiconductors (a great cyclical growth story). Eventually, these rallies run their course, and momentum traders move on to the next best thing. That might be happening right now to "The Great Pizza Rally of 2011-12."
This pizza rally has been interesting for a couple of reasons. First, it has been largely contained within a subsection of the fast-food industry that would rarely be classified as a growth market. Also, I can see how a buyer might justify the rally in his mind. After all, the economy isn't in great shape, so the average family might be buying more pizza. It's a weak argument, but it makes sense to those who don't trade using technical indicators. It's tangible, easy to understand and act upon, and reinforced by the media.
Today, we'll take a look at a couple of pizza players �� and a few other high-flying stocks �� and try to predict what the future holds for each��
Pizza Inn Inc. (NASDAQ:PZZI): This small pizza chain saw a big rally in its stock, taking shares from $3.50 in October to almost $7 by the beginning of December. Now, it looks as if the stock is stuck in the $5.50 range and possibly heading lower. The sharp uptrend that began in the fall is broken, so you shouldn't expect more upside from this name anytime soon:
Domino's Pizza Inc. (NYSE:DPZ): The king of pizza delivery is showing us a very similar pattern. Once again, we have a nice fall rally, lifting shares from $26 to $35 in a matter of weeks. However, 2012 has not been as kind to Domino's. While the broad market has rallied to post-correction highs, DPZ has fallen out of favor. You can clearly see the trendline break right at the beginning of January:
BroadVision Inc. (NASDAQ:BVSN): After failing to catch a bid for most of 2011, BVSN proves that you don't need a reason for an unannounced, triple-digit rally. This unheralded microcap started the month as a $10 stock, only to top $44 by yesterday afternoon. Not bad for a few weeks work �� and absolutely no news other than the sheer power of the rally itself.
But that's the thing with moves like this: they have to end eventually. And when they do, look out below. Check out the chart below for a very clear picture of what an unsustainable rally looks like. You should expect further downside action from here:
Apple Inc. (NASDAQ:AAPL): Finally, we turn to last night's earning surprise from Apple. Even without vaunted leader Steve Jobs at the helm, Apple reported record earnings on stronger than expected iPhone sales. Spurred on by a 6% move this morning, Apple once again overtakes Exxon Mobile Corp. as the biggest company trading on the U.S. markets, with a market cap approaching $417 billion:
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Tags: 2012 Best Stocks ,Best Stocks To Invest In 2012 ,Best Stocks To Watch For 2012 ,Best Stocks To Watch In 2012 ,Best China Stocks 2012