Stock Quotes in this Article: AA, CMG, F, NOK, SLV

BALTIMORE (Stockpickr) -- Don’t be fooled by the market’s tiny change yesterday, or by the decline in the VIX Volatility Index -- volatility is still a major theme to keep track of this week.

Even though the S&P 500 only closed 0.03% higher and the Dow lurched its way 0.34% above Friday’s close yesterday, both major indices saw major volatility swings on an intraday basis. Both the Dow and the S&P saw their values climb to approximately +2% early in the day, only to flirt with negative territory by the close at 4 p.m. on the East Coast. Those intraday swings are an indication that sentiment is knocking against extremes right now -- even if taking a look at end-of-day numbers doesn’t reveal anything out of the ordinary.

When the market is driven by sentiment, technical analysis is the ultimate investing tool. This week, with the market testing technical lows, we’ll take a look at five technical setups that could provide breakout gains this week.

Remember, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.

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    Here’s a look at this week’s setups.

    Ford


    Automaker Ford (F) has been absolutely shellacked in 2011 -- shares of the storied Detroit firm have fallen more than 40% since the start of the year. Now, shares of this carmaker are sitting in make-or-break mode. Traders should be keeping an eye on price action as Ford tests ultimate support at $10.

    Ford had previously been locked in a downtrend, but that downtrend accelerated when shares broke below their trendline support level back at the beginning of August. Shares found a bottom at the $10 level shortly afterward. Ten dollars is a significant level for a couple reasons: for starters, it’s a psychologically relevant price; when Ford drops into the single digits, buyers begin to think that shares look “cheap.” Another reason for strength at $10 is the stock’s price action on Aug. 8 -- buyers essentially springboarded shares higher as a glut of demand swept in at that price.

    Monday, Ford made new 52-week lows, but only temporarily. I’d recommend waiting for a double-bottom to form before becoming a buyer -- that happens when shares break above $11.50. Otherwise, a failure to hold $10 makes this stock a clear-cut short candidate.

    Ford shows up on recent lists of Top-Rated Automobile Stocks.

    Alcoa

     

    Almost the exact same setup is forming in shares of aluminum producing giant Alcoa (AA). Like Ford, this stock has seen a double-digit haircut on its share price this year, as waning sentiment dropped the floor from this stock in the last few months. Also like Ford, this stock is showing us a very tradable setup right now.

    Alcoa’s “ultimate support” level is right around $11.25, a price that shares close within a few cents of yesterday. Remember, a material breakdown below support makes this stock a serious short candidate -- even though I think most equities are trading at a discount right now, they could certainly fall farther in the near-term. A breakdown below that support level represents a supply and demand imbalance that favors the bears.

    That said, it looks like support will hold up today thanks to a bounce in Alcoa’s shares. With that in mind, the upside in Alcoa comes on a breakout above $12.50 resistance. Regardless of which way this trade emerges risk management will be crucial. On the long side, keep a protective stop just below $11.25. On the short side, you’ll want a stop just above that $12.50 resistance level.

    Alcoa shows up on recent lists of 8 Base Metal Stocks to Watch.

    Chipotle Mexican Grill

    Meanwhile, a significant support break has already taken place in shares of Chipotle Mexican Grill (CMG). Chipotle has been the growth stock story of the past few years for the restaurant industry – and this quick service chain has already seen nearly 30% price appreciation as a result. But a break in the stock’s uptrend last week means that that growth may be slowing in the firm’s shares.

    A trendline break doesn’t necessarily mean that the floor is falling out of Chipotle. More likely, it’s just a deceleration of the uptrend that’s carried shares since before the start of 2011. That said, buyers should be aware of what’s going on right now. With no support for shares just yet, risks are outsized for an entry in this stock. I’d recommend waiting for a bounce off of the 50-day moving average (which coincides with organic support at $270) before trying to take on a position in Chipotle.

    Chipotle shows up on recent lists of Top-Rated Restaurant & Hotel Stocks.

    Nokia

    Nokia (NOK) has been almost the exact opposite case in 2011. As Apple’s (AAPL) iPhone dominated the smart phone business to start the year, shares of this Finnish mobile device maker have made a prodigious slide. But taking a closer look at Nokia’s chart, there’s actually a bullish setup in shares.

    That’s because even though shares have been trending lower between two dynamic support and resistance levels, those trendlines have been converging to form a pattern known as a falling wedge. While the pattern looks bearish, it’s actually a bullish pattern with one of the highest statistical success rates in technical analysis -- studies suggest that a wedge results in a reversal nearly 90% of the time.

    The “buy” signal came on the stock’s break out of the wedge on Aug. 15. Since then, shares have consolidated above the 50-day moving average, building a base for a likely leg higher. I’d recommend going long here with a tight protective stop just below $5.50. Traders can disregard most of the gaps in this ADR – they’re just suspension gaps that result from trading overseas after hours.

    Nokia shows up on recent lists of 20 Top-Yielding Telecom Stocks.

    iShares Silver Trust ETF

    Last up this week is the iShares Silver Trust ETF (SLV), a fund that’s been getting a lot of attention for its ability to track silver prices. With equity prices in freefall, metals have been the ultimate alternative -- and these ETFs are popular trading vehicles as a result. In August, silver has lost its shimmer somewhat compared to gold -- but that could be about to change thanks to a breakout in silver prices this week.

    Yesterday, shares of SLV broke out above their uptrend line, a move that suggests shares another thrust upward could be forthcoming. This morning, we’ll likely see a re-test of that newfound support level, but as long as silver prices don’t close materially lower than the upper trendline, we’ve still got an upside trade in silver. I’d suggest waiting to see where the metal closes today, then make a trade on the ETF’s next white bar day.

    Silver traditionally has more volatility than gold, so it’s far from a risk-free trade, but returns also significantly outpace the yellow stuff. To reduce downside risk, I’d recommend a protective stop at the 50-day moving average.

    To see these plays in action, check out the Technical Setups for the Week portfolio on Stockpickr.

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    -- Written by Jonas Elmerraji in Baltimore.

    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.