LO Watch

Cigarette maker Lorillard Inc. (LO) looks remarkably -- well, healthy -- both on its charts and its fundamentals, making it a candidate for growth with a decent dividend as a bonus.

	trend	sto	sto zone	pps	psar	macd	macd trend	ma20	ma200
LO $82.05

The chart shows the beginnings of some near-term weakness, which creates a potential buying opportunity for the patient trader.

The fundamentals are well within my guidelines for bull plays on growth stocks. The return on equity, 322%, is awesome. Annual revenues have grown by a yearly average of 10% the past four years, and the stocks is 96% owned by institutions. Plus, the annual dividend is 5.5%, paid quarterly.

Now, I confess to some squeamish about the business LO is in. In my youth, I smoked four packs a day -- more than James Bond! -- and the practice damaged my health in big ways and small, throwing my heart and lungs into bear phase, bigtime.

The excellent finances of this company shows that profit and promoting health don't necessarily go hand-in-hand. Capitalism is filled with examples of companies that got rich by ruining peoples lives. It's a fact.

On the chart, this is an old uptrend. The stock has been on the rise, with corrections, since hitting a recession low in January 2009. The most recent correction bottomed last June and has since pushed on to a higher high.

The shorter-term indicators moved to bull phase in late August, during a period that saw the price bump above the 200-day and 20-day moving averages.

However, the fast stochastic moved to bear phase today, and the macd is dropping toward the zero line. A drop to the nearest price support would bring the stock to within 1% of the 20-day moving average. That would set up a decent entry point to ride the next wave up.

A move above Tuesday's high puts LO into blue-sky territory, with no upside resistance.

Reversal Levels

• $83.03, +1.2% (all-time high)
• $82.05 <== You are here.
• $79.97, -2.5% (swing low)
• $79.96, -2.5% (20-day ma)
• $76.54, -6.7% (200-day ma)

Bottom line: I like this stock on the charts and the fundamentals as a growth play with income. I like it best best on a retracement below 80.76, which is 1% above the 20-day moving average. But I'd take it on a push above the $83.03 high.

Disclaimer

Tim Bovee, Private Trader tracks the trades of a private trader for his own accounts. Nothing in this blog constitutes a recommendation to buy or sell stocks, options or any other financial instrument. The only purpose of this blog is to provide education and entertainment. No trader is ever 100 percent successful in his or her trades. Trading in the stock and option markets is risky and uncertain. Each trader must make trading decision decisions for his or her own account, and take responsibility for the consequences.

Abbreviations:

• pps - Person's Proprietary Signal.
• psar - Parabolic Stop and Reverse
• ma20 - 20-day moving average
• ma200 - 200-day moving average
• macd - Moving Average Convergence-Divergence
• sto - Fast Stochastic

About the glance: The colors indicate the state of each signal.

• trend: Determined by the 5-day moving average, green for up, red for down, yellow for sideways.
• sto: green for bull, red for bear.
• sto zone: green for overbought (80+), red for oversold (20-), yellow for neutral zone
• psar, pps, macd: green for bull mode, red for bear.
• macd trend: green for rising, yellow for sideways, red for falling.
neutral.
• ma20, ma200: green for above the average by more than 1%, red for below the average by more than 1%, yellow for within 1% either side of the average.