ARMH is a Monster Hyper Momentum Stock

ARMH has been the ‘poster child’ stock in terms of momentum and strong persistent trend.  ARM holding has benefitted from their low power consumption microprocessors and the booming sales of iphones and other hand held devices.  Not to mention their strong order backlog.

I recall hearing about another stock with a very strong order back several years ago and I believe it was RIMM, makers of the blackberry.  That stock had a very strong move as well.  Stocks with large order backlogs can be great momentum stocks to trade as seemingly endless demand can support a stocks uptrend.

I think ARMH is too overextended now for a good entry point.  The recent buy was near 19.5.  But to chase ARMH now is bad medicine in my opinion.

ARMH has had a strong trending advance from early 2009, but then in May 2010 the stock started to trade higher in a steeper trendline.  This could be a sign that eventually ARMH wants to trade parabolic similar to the way it did in the year 2000 time frame.

I think the best way to buy a stock such as ARMH is to wait for a price retracement back to the strong up trendline.  This of course will take a lot of patience, but chasing this stock is just not worth the risk.

Ideal entry points in ARMH are after retracements or new patterns such as head and shoulder bottoms that form as a consolidation.

The longer term chart shows that ARMH appears to be on a mission to the 24 level which is only about 14% from here.  There is a key resistance band at that level as well as an important monthly price swing.  I would expect some time of retracement or pullback from that level back to the green up trend line.

This 24 level could coincide with an sp500 move to 1300.  Assuming sp500 makes it to 1300, I would expect some time of correction to start from there as it is a key resistance area.

So ideally the lowest risk possible entry point in ARMH would come from the next minor reaction off of the 24 range.

The weekly ARMH chart shows that the next top in price should occur when weekly RSI gets near the 80 range which supports the idea that it is coming close to max overbought level.