Four Must-See Charts of the Day - 19776 views

U.S. stocks plunged on Tuesday, selling off into the close, after Treasury Secretary Timothy Geithner’s “Financial Stability Plan” failed to impress the markets and left many questions unanswered as to how the plan will deal with the toxic assets on the balance sheets of the biggest banks in the U.S.

The Dow Jones Industrial Average lost 381.99 points (4.6%) to 7,888.88, the S&P 500 dropped 42.73 points (4.9%) to 827.16 and the Nasdaq fell 66.83 points (4.2%) at 1524.73.

Further developments for the government’s mega-budget stimulus bill, which passed the Senate by a vote of 61-37, did nothing to generate bullish activity on Wall Street. The bill is now set to go in front of the joint committee of the House and Senate for a compromise.

The markets were clearly disappointed by the lack of clarity from Geithner on his $1.5 trillion plan to fix the financial markets. The new plan is reported to combine investments from the public and private investors with a consumer and business lending initiative. However, Geithner failed to provide any details on what he will do with the fair value, or mark-to-market, accounting rules that many on Wall Street had hoped he would suspend or make significant changes to.

The ever-changing game on Wall Street is forcing many investors to adapt and find new approaches to making money in these turbulent times. One way you can eliminate the noise and avoid the market drama is with the use of technical analysis.

Technical analysis combines many different methods like trend lines, trading channels, resistance and support levels and volume to help determine future stock price movements.

Technical analysis is not an exact science. However, the discipline of studying charts can be helpful in eliminating emotions from the investing process as investors attempt to determine the true supply and demand of a stock.

One of the key beliefs of technical analysis is to trade with the trend. With that in mind, let’s take a look at four charts that, from a technical view, could be setting up to trend higher or lower according to their chart patterns.

1. Boots and Coots Intl. Well

Boots & Coots International Well Control (WEL) provides a suite of integrated pressure control and related services to onshore and offshore oil and gas exploration and development companies, principally in North America, South America, North Africa, West Africa and the Middle East. Wednesday morning, the company announced it has entered into a new $54.4 million credit facility led by Wells Fargo (WFC). The company said the new facility will provide liquidity and flexibility to execute their business plan. Looking at the chart below, you can see that WEL has started to trade above previous resistance of around $1.29 a share on heavy volume.

On Tuesday, volume surged to 1.1 million shares, versus the average daily volume of around 390,000 shares, as the stock broke above that previous resistance. Shares of Boots and Coots have also broken above a downtrend line that started in November 2008, which could be signaling that a new uptrend is starting. Watch for this stock to make a move back to the next level of significant resistance at around $1.90 a share.

2. Apple

Apple (AAPL) designs, manufactures and markets the popular iPod and iPhone (to name only a few of its digital consumer products). Recently, this stock has seen an increase in volatility driven by the ever-changing news of CEO Steve Jobs’ health issues. What is interesting, however, is the chart pattern that is starting to form for Apple. The chart for AAPL shows a trading channel developing, where shares are trading between the prices of around $103 a share and $79 a share. This week the stock hit the upper end of that channel and started to sell off.

Shares of AAPL now seem poised to trade back to the 50-day moving average of $91.13. If the stock breaks that level, it could be on its way back to the lower end of the trading channel at $79.

3. Energy Conversion Devices

Energy Conversion Devices (ENER) commercializes materials, products and production processes for the alternative energy generation, energy storage and information technology markets. On Tuesday, a Piper Jaffray analyst upgraded the stock to buy from neutral, but warned investors that the stock could be volatile in the near-term as other solar companies roll-out their earnings reports which could be weak. The chart for ENER shows the stock is coming up on previous resistance at around $30 a share. The stock has also started to move above the 50-day moving average of $25.04 a share and has broken above a downtrend line that started in October 2008.

If ENER can trade above previous resistance (around $30) it could be a sign shares are set to head much higher. It’s also worth noting that over 25% of the float is sold short as of February, which could spark a short-covering rally in the name.

4. SIGA Technologies

SIGA Technologies (SIGA) is a biotechnology company that discovers, develops and commercializes anti-infectives for serious infectious diseases. Wednesday morning, the company announced that the Department of Health and Human Services has issued a presolicitation to procure a smallpox antiviral drug to add to the Strategic National Stockpile. Looking at the chart below, you can see that SIGA has broken above previous resistance at around $4.20 a share on extremely heavy volume. The stock is also hitting a new 52-week high, which is usually an indicator of much higher prices in the future. Volume exploded on Tuesday, hitting 560,000 shares, versus the average daily volume of only 90,000 shares. This stock could be on its way back to around $6 a share (or higher), which marks the next area of overhead resistance.

To learn about a few more charts that look compelling right now, visit the Charts of the Week portfolio.