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Bull of the Day: Datawatch (DWCH)

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For a while there, anything big data or cloud related was on fire. Bringing complex data analytics to the everyday company was revolutionizing the way we do business. But then, like most trends in the market, it eventually stalled out. The good news is, there’s been a bit of a resurgence in these stocks and I’ve got an emerging stock here, breaking out to new highs as my Bull of the Day.

Datawatch designs, develops, markets, and distributes business computer software products to self-service data preparation and visual data discovery markets in the United States and internationally. Its software solutions allow organizations to access, analyze, and visualize their information. The company’s products include Datawatch Monarch, a self-service data preparation tool to explore, manipulate, and merge new data sources; Datawatch Panopticon that enables real-time preparation of streaming data for data analysis; and Datawatch Report Mining Server, a Web-based report analytics solution that integrates with existing enterprise content management system for unlocking the corporate data.

The market got a little grumpy Thursday afternoon and put some pressure on tech stocks. This selling had little to do with fundamentals. Datawatch is still a Zacks Rank #1 (Strong Buy) based on earnings estimate revisions coming from analysts. Following their earnings report, analysts revised their earnings estimates for the current quarter, next quarter, the current year and next year to the upside. The most dramatic move was present in the current year estimates where our Zacks Consensus Estimate went from a 30-cent loss to a 15-cent loss. Next year’s numbers have increased from 5 cents to 9 cents.

As for the stock price, shares of DWCH have been in a very solid uptrend since January of this year when the stock was down around $5. Since then a series of moves higher have stepped the stock up over $11 before Thursday’s afternoon selloff in tech. Intraday action took DWCH down to $10.15 before recovering into the close. The 50-day moving average sits below $9, providing downside support and confirming the intermediate bullish trend.

The commodity channel index can be used as an overbought/oversold indicator but is also very useful in determining continuation patterns. A common continuation pattern is a CCI which comes down to the zero line while a stock is trading very close to highs. With the CCI coming down from very overbought territory over 250 and approaching the zero line this continuation pattern could be developing over the next couple of days.

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