Breakout Watch: Sonic Automotive, B. Riley Financial, TC PipeLines

When sizing up short term opportunities, for most investors momentum and technicals tend to take precedence over fundamentals. The former tells you what’s going on inside the company but the latter paints a picture of what’s happening outside, in the minds of the stock’s investors. If every low is being bought or if shares can’t hold a high, then their next move can often be predictable.

Here are 3 companies whose charts are painting interesting pictures and who are worth keeping on a watchlist for near-term breakouts. 

Sonic Automotive NYSE: SAH

Share of Sonic Automotive NYSE: SAH is having a stellar 2019 so far, up almost 170% since January. The Charlotte-based automotive retailer is one of the biggest in the country and comfortably bet estimates with their third-quarter earnings release last month. Shares gapped up on the news to 17-year highs after the company reported growth in net income of 93%. It was the third quarter in a row where shares gapped up after earnings.

April’s release set the tone for the stock’s current run and shares have taken a very orderly march higher since then, sticking to a solid, dependable range.

Investors should look for some consolidation at the $34 level before a move higher, with near term support around $32. The next target will be the stock’s all-time high of $39.75, which it briefly touched in May 2002 before quickly fading. It’s only a 17% move away from this level and with trading momentum and fundamentals behind it, there’s no reason not to have SAH on the watchlist.

B. Riley Financial NASDAQ: RILY

1. B.Riley Financial NASDAQ: RILY is a stock that knows how to keep Wall Street on its toes. For a financial services firm, IPO’ing in late 2007 couldn’t have been worse timing. Shares and shareholders were slaughtered in the following four years, losing up to 99% of their value at a low point in 2011 when shares flirted with penny stock territory.

However, leadership managed to steady the ship at that point and it’s been nothing but a success story since then. Shares are up over 1,300% in the years since and with a 104% performance so far in 2019, it’s safe to say they don’t look tired yet

Though they’re still a long way off from the IPO price, they’re trading at 9-year highs with solid momentum behind them. They’re entering levels last seen during the bloodbath days of 2010 when the stock saw 8 down months in a row and stops were being hit left, right and center.

With that in mind, it’s not too dissimilar to blue-sky territory and there’s probably some quick and easy ground to made here.

Shares are currently consolidating after gapping up with October’s earnings release and are forming a tightening pennant where the pressure is building. If they can hold $28 and break through the downward slope, they should be in good shape to finish the year strong.

TC PipeLines NYSE: TCP

After a spectacular 60% fall in 4 months in early 2018, shares of TC PipeLines NYSE: TCP have worked hard to claw back the lost territory. They’ve followed a solid trend line back up through the levels and put in a short term high this past September.

The oil pipeline company reported earnings at the start of November and while they were down 20% from the same time last year, they still bet expectations.

Their shares’ current level at $40 has been a source of both support and resistance over the past decade and is looking to be the critical price at which shares decide their next big move from. Bulls were unable to keep the stock above $40 in 2005, 2007 and 2009 while sellers couldn’t keep shares under them price in 2011, 2012 and 2016.

There’s an attractive looking wedge forming from September’s high and a break to the upside would clear the way for a 25% move towards $49. That’s the price at which sellers broke the levee in 2018 and shares lost 25% of their value in two days of trading. A fast move down through certain prices can often make a fast move back up through them just as easy.