Navios Maritime Holdings Inc. (NM)

[Chart Addict]

Why Navios Maritime Holdings.

On June 28, a Zacks Analyst Blog entitled "7 Incredible Fallen Angels from Small Caps for Your Portfolio" included NM among its fallen angels. The stated goal of the Zacks screening algorithms "is to pick stocks that can supersede near-term pressure and lead to profitability in the long term."

That sounds good to me. Now I don't have to pour over all of that largely superfluous financial data at places like Finviz.com trying to find the magic combination, because Zacks does all of that work for me. When you go to the Zacks profile on Navios, as of July 22, you'll see that NM has been rated as a Zacks #1 - Strong Buy. Isn't that nice of them?

Now let's talk about the technicals, because that's what I understand far better than the fundamentals.

1) As a rule, I avoid stocks under the 200 day MA, but when they've sunk as low as some of these shipping stocks have, there is no choice but to forgo that rule unless one is willing to miss the opportunity of being near the bottom where the potential for the most explosive gains may be found.

2) It bears mention that NM has formed what is apparently a multi-month complex bottom. Thus, we have a good sense of where the foundation of support is. That foundation is something of a safety net serving to minimize the risk of complete ruin for the position.

3) Shipping stocks are long overdue to break out. It's been a long time since the crash of 2009, and this is among the few sectors remaining that haven't made some serious upward movement. Now the sector is finally heating up. TOPS recently made a huge breakout on no news whatsoever. Today's volume was 5,248,164 shares traded for TOPS, which came in second place to DRYS, which topped the list with 14,7722,221 shares traded. NM came in at number 8 on the hit parade today, with 1,388,313 shares traded.

4) Now, let's review NM's 5 minute chart over the course of the last five trading days. (This is what sold me on opening a position.) NM pops up on Monday morning, and levels off on a bedrock of support in the $1.00 - $1.04 range. Thereafter comes a nice thrust, after which NM pulls back to form a second bedrock of support, forming a succession of narrow-range bars in the $1.20 range.

As I look at all of this, I see a great setup. But, there are two schools of thought on such matters. There are those who think that buying a position is "gambling," meaning they believe that the odds of it going either up or down from here are approximately 50/50.

I think that all of the information I have just laid out - taken together with this chart - give a probability of NM moving higher rather than lower, and that the odds greatly favor an upward movement rather than a swing to the downside. It is to me a "high-probability trade setup," to borrow from Tim Knight.