Another of that kind: HOM

For a start I'm not going to tell you what this company does, or what are their financials. I want you to focus on the next two charts:





They are pretty similar, aren't they?

Now let's compare the long term charts of the two companies, VPHM and HOM:





Again, the charts match very well, so exclusively according to technical analysis, the two stocks are basically the same. Perhaps I don't have to tell you what happened to VPHM after the pattern we're identifying here, but I'll show it anyway, since it is one of the most beautiful bullish trends I've ever seen:



The stock shot up 8 fold in just 4 months

I know, I know, you're thinking:

«But that doesn't mean anything, fundamentals are completely different, one is a biotech and pharma company and the other provides specialty residential services»

My answer for this argument is: the market is made by people. Stocks don't go up by themselves, they need sponsors to bolster their prices. The way people trade a stock tells you a lot about its future potential and that can be perceived by analysing a chart. These two charts tell me people anticipate the same future for these two stocks.

VPHM and HOM are definitely stocks that I want. If you feel more pleased check the fundamentals on HOM, I think they are very attractive. Here I see a very simple trading plan in the making with low risk and huge potential (hold the stock and possibly add on pullbacks for as long as it closes above the ascending trendline).

I'm buying HOM tomorrow for the 3 Stocks on Fire Portfolio.

(This recommendation was made by David Randolph from 3 Stocks on Fire, and he will update this analysis everyday after the close until he sells the stock. The 3 Stocks on Fire Portfolio is up 148% since inception on 28th of April 2005. 3 Stocks on Fire is a Community of stock traders and investors. Our 3154 members exchange trading ideas and strategies on our message boards everyday. We welcome you as a new member of the 3 Stocks on Fire Community, please take 10 seconds to register and receive our free newsletter)