Stock Quotes in this Article: BIDU, CMG, F, GLD, JPM

BALTIMORE (Stockpickr) -- Yesterday’s selling shouldn’t have come as a huge surprise to most active traders -- as long as the U.S. debt crisis continues to spread uncertainty to the capital markets, sellers are going to continue to be more forceful than buyers. All told, the S&P 500 shed 2.03% by Wednesday’s market close, making yesterday the June 1 sell-off. The Nasdaq Composite fared considerably worse, dropping 2.65% in yesterday’s session.

And the market continues to be seriously disconnected from fundamentals.

After all, companies are bringing in cash by the truckload this earnings season. As of this writing, 16 of the 19 Dow Jones Industrial Average components that have released earnings have beat Wall Street’s expectations. In the larger S&P 500, nearly 78% of reporting companies have already posted positive earnings surprise this quarter. While fundamentals are extremely important, fundamental investing just doesn’t work in these types of short-term scenarios.

 

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    That’s one of the biggest strengths of technical analysis -- it’s a study of the market itself, the only mechanism that determines a stock’s price. Technical charts are used every day by proprietary trading floors, Wall Street's biggest financial firms and individual investors to get an edge on the market. And by some measures, skilled technical traders can bank gains as much as 90% of the time.

    Every week, we take an in-depth look at large-cap stocks that are telling important technical stories. Here’s this week’s look at the technicals of five must-see stocks.

    SPDR Gold Trust ETF

    It makes sense to start off with the de facto alternative to stocks: gold. Gold has been performing extremely well in the past few years, taking on significant buying as investors in both stocks and the U.S. dollar sought a “better protected” asset to put their money in. One of the most popular vehicles for that flight to quality has been the SPDR Gold Trust ETF (GLD), a $63 billion fund that owns gold bullion physically held in HSBC’s underground vaults.

    Gold and silver had both shown some weakness in the last couple of months, as their accelerating uptrends slowed down for the first time since the recession resparked interest in precious metals. That’s certainly not the case any more. Gold has been pushing to new highs in the last month, breaking out above the GLD’s resistance range of $153 on July 12. The stock gave us a throwback the following week to retest support -- and now shares are looking primed for another rally run.

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    With shares still consolidating right above that support level, now looks like a good opportunity to build a position in shares. While the inverse correlation between gold and equities doesn’t really hold true anymore, this fund should be a decent hedge against stock investor ennui in the short-term at least.

    GLD, one of John Paulson's top holdings, shows up on a list of hedge funds' biggest buys and sells for the most recently reported period.

    JPMorgan Chase

    A similar setup is taking shape in shares of banking giant JPMorgan Chase (JPM) right now. Shares have been consolidating in between a horizontal resistance and support level for the last two months, forming a setup that I call an “if/then trade.” It’s the same setup that gold had been stuck in before it broke out this month.

    Simply put, an if/then trade is a trade whose direction is contingent on the price action of a JPM. If shares break out above resistance, then it’s time to go long. If shares break down below support, then this stock becomes a short candidate. The fact that this sideways consolidation busted JPM’s medium-term downtrend adds a considerable bit of credibility to this setup. Now it’s just a matter of waiting for the break in either direction.

    Either way this trade ultimately plays out, I’d recommend placing a protective stop just inside the channel to avoid against unforeseen market moves. With other big banks still stuck in downtrends right now, JPMorgan is the most tradable big bank this summer.

    JPMorgan shows up on recent lists of 5 Goldman Post-Earnings Bank Picks and 8 S&P Stocks Set to Climb.

    Chipotle Mexican Grill

    2011 has been a good year so far for Chipotle Mexican Grill (CMG); shares of the quick service restaurant chain have rallied more than 51% since the first trading day of January. This stock has momentum and market sentiment clearly in its favor right now -- it’s the Apple (AAPL) of the restaurant world.

    Chipotle’s most meaningful breakout came back in late June, when the stock pushed above resistance at $290. Don’t worry -- if you missed that move higher, a throwback in shares is giving investors a second chance at a low risk entry.

    The weakness in the broad market pushed Chipotle’s shares back down to retest support in the last few days, an important technical development for investors who are looking to buy. A retest of support is an ideal buying opportunity because of the limited risk involved in taking on a position. Support levels are prices under which there is an abundance of demand for shares, so tight protective stops can be placed with a reasonably remote risk of actually getting stopped out of the trade.

    For a throwback, it’s not enough that shares of Chipotle test support at $320. They also need to actually bounce higher off of that support level as eager buyers bid up “cheap” shares. After shares touch support, buy on the first white bar session.

    Chipotle, one of Jim Cramer's FADS CAN stocks, is one of Renaissance Technologies' top holdings as of the most recently reported period.

    Baidu.com

    Baidu.com (BIDU) is offering up another throwback buying opportunity. Shares of the Chinese search giant gapped higher this week on strong earnings, triggering an inverse head-and-shoulders setup that had been forming in shares since the end of April. Now Baidu is returning to test support at the range (R2) between $155 and $160.

    Again, the key to buying this retest of support is to wait for shares to actually bounce higher off of that support. Risks on a trade haven’t been mitigated until the support level has actually been confirmed by increased buying.

    Baidu shows up in various Stockpickr professional portfolios, including those of Ken Fisher and Chase Coleman's Tiger Global Management. It's also one of TheStreet Ratings' top-rated Internet software and services stocks.

    Ford Motor

    Last up this week is Ford Motor (F), the best-in-breed automaker whose 2011 share price performance has been anything but. Ford’s slid more than 26% so far this year. Now the question is whether shares can set a floor -- or whether this stock is still a short candidate.

    Frankly, I like Ford -- I highlighted it recently in "6 Earnings Surprise Stocks for Your Portfolio ." The strides the company has made in product quality, operational efficiency and financial strength are striking. But that’s not the same as saying that now’s a good time to buy shares.

    This week, Ford is retesting support at $12.50, a price level that shares plunged below in the course of yesterday’s major selloff. A break below support is a pretty clear short signal for traders -- but don’t go placing your orders just yet. It’s not simply a single-day breakdown that’s significant (especially on a day like yesterday); instead, we’re looking for confirmation of a break below $12.50 before it makes sense to bet against Ford.

    Ford’s rebounding a bit early in today’s market session -- if that correction continues above $12.50, shorts won’t have confirmation the confirmation they need. If shares continue to slide today, however, that’s all the confirmation we’d need to justify a short position in this stock. As much as I like Ford, I’d recommend buyers sit on the sidelines for now.

    To see this week’s potential trades in action, check out the High Volume Technicals portfolio on Stockpickr.

    -- Written by Jonas Elmerraji in Baltimore.

    RELATED LINKS:

    >>5 Airline Stocks That Could Fly Higher
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    >>5 More Earnings Stocks Set to Soar

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    At the time of publication, author had no positions in stocks mentioned.

    Jonas Elmerraji, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia, and has been featured in Investor's Business Daily, in Consumer's Digest and on MSNBC.com.