Stock Quotes in this Article: ADM, GE, LOW, XOM, PSX

BALTIMORE (Stockpickr) – It’s “Data Thursday,” and that means that a handful of new key economic numbers could be a big catalyst for big stock price moves today.

 

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On the deck for today, we’ve got everything from housing and jobs numbers this morning to Federal Reserve stats slated to hit Wall Street this afternoon. And since it’s earnings season, there’s an even bigger pile of data that could impact market prices for this trading session.

I think that Mr. Market’s current position looks unabashedly bullish – but I won’t belabor the point today (you can get my longer-term take here). Instead, I want to let the stocks speak for themselves with a technical look at five big tradable charts that could pad your portfolio this month…

If you're new to technical analysis, here's the executive summary.

Technicals are a study of the market itself. Since the market is ultimately the only mechanism that determines a stock's price, technical analysis is a valuable tool even in the roughest of trading conditions. 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 research shows that skilled technical traders can bank gains as much as 90% of the time.

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Every week, I take an in-depth look at big names that are telling important technical stories. Here's this week's look at the charts of five high-volume stocks to trade for gains.

Lowe’s

First up is home improvement retailer Lowe’s (LOW), a stock that’s been on a tear lately. Shares of the $40 billion firm have rallied more than 36% in the last year, besting the broad market by a big margin. But more recently shares have been posting less impressive numbers, essentially sliding sideways. Here’s why that’s a reason to buy…

Right now, Lowe’s is forming an ascending triangle pattern, a setup that’s formed by a horizontal resistance level to the upside at $36.50 and uptrending support below shares. As LOW bounces in between those two technically important levels, it’s getting squeezed closer and closer to a breakout above that resistance level. When the breakout happens, we’ve got a buy signal in this stock. The support level is in a shallow uptrend (it’s nearly flat), but ultimately the trading implications are exactly the same.

With any technical pattern, it’s critical to think in terms of buyers and sellers – not shapes. After all, triangles, wedges, and the like are a good way of describing what’s happening on a chart, but they’re not the reason why it’s tradable. Instead, it all comes down to the supply and demand caused by those buyers and sellers.

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The horizontal resistance level at $36.50 in LOW is a place where sellers have previously been more eager to sell and take gains than buyers have been to keep buying. But uptrending support tells us that buyers do have some control over shares at lower levels. The breakout means that buyers were able to absorb all of the excess supply of shares that was sitting above $36.50. Without that price barrier above shares, it makes sense to be a buyer. Don’t be early on this trade.

Phillips 66

Phillips 66 (PSX) is another stock that’s having a great year. Shares of the downstream energy company have rallied more than 66% in the trailing 12 months, unlocking considerable value for shareholders following the spin-off from ConocoPhillips (COP). At this point, there’s little reason to believe that the uptrend is over.

It doesn’t take an expert technical analyst to figure out what’s going on in Phillips 66; a quick glance at the chart tells you pretty much everything you need to know. PSX has been in a solid uptrend since the market’s short-term bottom in June, and it’s been bouncing higher in between trendline support and resistance ever since. Those support and resistance levels give us a high probability range for this stock to trade within. And as you might expect, the ideal time to be a buyer is on a bounce off of support – and that’s exactly what we’re seeing this week.

When you’re looking to buy a stock within a trend channel, buying after a bounce off of support makes sense for two big reasons: it’s the spot where shares have the furthest to move up before they hit resistance, and it’s the spot where the risk is the least (because shares have the least room to move lower before you know you’re wrong).

The 50-day moving average has been a good proxy for support over the course of the pattern – that’s where I’d recommend putting a protective stop on this trade.

Archer Daniels Midland

On the other hand, Archer Daniels Midland (ADM) has had a less stellar year. This stock has shed a few hundred basis points over the last year, a time when the rest of the stock market climbed pretty substantially. But a reversal pattern in shares means that the worse of the selling could be over for ADM shareholders.

ADM is currently forming a double bottom, a reversal pattern that’s formed by two swing lows that bottom out at approximately the same price level. Those two bottoms are separated by a peak, a level that marks the trigger point for this trade. For ADM, that breakout level is $29 – a move above that price sends a buy signal for this stock.

There are two important things to consider about the ADM trade. First, the double bottom is a deep pattern, with a range accounting for around 20% of the stock’s price. Second, the pattern has been forming since the summer, so it’s a long-term setup. Those two factors mean that a breakout in ADM is more likely to move shares materially higher and for a long time. Keep that in mind as you wait for the breakout in this stock – and when it happens, keep a tight stop.

Exxon Mobil

If the chart above of Exxon Mobil (XOM) looks sort of familiar, it’s because I featured the oil and gas supermajor in this same column last week. There is one big difference since then, however, and it warrants a second look.

Last week, we were watching for a breakout in Exxon’s falling wedge. Despite appearances, the falling wedge is actually a bullish pattern that’s formed by converging trendlines – and the breakout above resistance was the buy signal for this stock. We got that breakout just a couple of trading sessions ago, and shares have been consolidating ever since. That’s a buy signal for XOM right now.

As expected, momentum was an early indicator that a breakout was forthcoming – 14-day RSI pushed through its trendline resistance level two days before XOM’s share price did the same. Momentum should continue to be a good way to spot divergences in advance for this stock. If you do decide to be a buyer here, I’d recommend putting a stop just below the 200-day moving average.

General Electric

As usual, we’re not looking exclusively at bullish setups today – there’s a downside setup that bears looking at in General Electric (GE) right now.

GE is forming a head and shoulders top. In a sentence, the head and shoulders is a pattern that indicates exhaustion among buyers. It’s formed by two swing highs that top out around the same level (the shoulders), separated by a bigger peak called the head. A breakdown below the support level that connects those three peaks (called the neckline) is the signal to sell or short shares. The neckline in GE comes in right at $20.30.

Since the neckline hasn’t been broken yet, this stock isn’t signaling to sell (or short) just yet. That dashed grey line, for instance, is still connecting higher lows in this stock. But it’s worth mentioning that a breakdown below the neckline will also coincide with a break of that trendline support level at this point. For that reason, I’d recommend keeping a close eye on this stock – there’s an absence of bids below that level, so if the neckline does get broken, the move lower could be quick.

To see this week’s trades in action, check out this week’s Must-See Charts portfolio on Stockpickr.

 

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Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

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