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Must-See Charts: Abbott, Toyota, Schlumberger - 22698 views
BALTIMORE (Stockpickr) -- Yesterday was a strong day for stocks. The S&P 500 and the Nasdaq Composite gained 0.42% and 0.74%, respectively. And today, stocks futures are looking to extend those gains.
The market’s push upward is fairly critical right now. With major indices sitting just below a key support level, a concerted move higher to end the week could put an end to the brief pullback that many traders had expected following the incredibly strong rally of the last several months. Auspicious though it may seem, a premature move higher is somewhat of a concern since it could shove stocks back into overbought territory and bring a much larger correction with it.
It’ll be important to keep an eye on where indices sit in the near-term. With strong S&P resistance at 1300, a move above that level suggests that stocks are back in rally mode. But regardless of the broad market’s moves, we’re turning to the technicals to see what’s happening with Wall Street’s biggest names.
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In case you're not familiar, technical analysis uses a stock's price movements to determine where shares are headed in the future. Technical charts are used every day by proprietary trading floors, the Street's biggest financial firms and individual investors to get an edge on the market. And according to some sources, skilled technical traders can bank gains as much as 90% of the time.
Here's this week's look at how some of the biggest names on Wall Street are trading technically.
Improving auto sales and fading memories of recall fiascos have helped spur a 16% rally in shares of Japanese auto giant Toyota (TM) since the beginning of November. But shares topped earlier this month, leading investors to wonder whether Toyota has further to fall. The technicals point to a halt in the selloff.
Toyota’s year-end rally may have delivered strong gains for investors, but the increase in share price also left shares of the automaker severely overbought. That meant that a correction was likely to occur -- and occur it did. But Toyota already found a bottom last week, and although shares are re-testing that support level, it’s likely that they’ll catalyze a bounce higher as buyers start to move in again.
Because shares of the company are so close to support right now, I’d recommend waiting for a white candlestick day (the bounce) before going long Toyota. If and when it happens, the stock could take another crack at its 52-week highs. With a C hold rating from TheStreet Ratings, Toyota is one of the top-rated automobile stocks.
A similar situation is forming in shares of Abbott Laboratories (ABT), a stock that’s been subject to sellers lately. Yesterday, the company sold off sharply following a 2011 earnings forecast that failed to meet Wall Street’s estimates. But like Toyota, this stock is finding support right now.
Abbott has had a fairly rough quarter (shares slid 11% in the last three months), but it found a bottom back in December. Since then, this stock has been trading in a horizontal consolidation channel, a bit of sideways price action that gives investors an opportunity to re-evaluate Abbott’s prospects. Although yesterday’s decline was painful for investors, it was controlled inasmuch as shares fell right to channel support.
A fall to support isn’t a concern in and of itself – it’s only when shares fall through support that investors need to worry. For that reason, today’s price action will be critical for Abbott. If shares do move below that support level, expect a move back down to $45.50.
Abbott shows up in the portfolios of John Hussman and D.E. Shaw, which increased its position in the stock by 67.8% in the most recent reporting period. TheStreet Ratings has a B- buy rating on the stock.
Unlike the other two stocks we’ve looked at today, Schlumberger (SLB) is approaching full breakout mode right now. The stock gained considerably in yesterday’s trading session, and it’s currently pressing right against resistance -- a level that, if broken, could spur much higher prices in the short term.
Also in Schlumberger’s favor is the fact that the company has support just below its current price level. That downside barrier significantly reduces the risk profile of a long-side trade on the company. Traders will want to watch out for a sustained breakout above $87.50 today. Keep a tight stop below support to avoid having this trade move against you.
As of the latest reporting period, Schlumberger comprises 1.6% of Ken Fisher's portfolio and 0.4% of Renaissance Technologies'. According to Jake Lynch, it's one of the five best energy stocks for $100-plus oil. TheStreet Ratings rates it a B buy.
To see this week’s trades in action, check out the High Volume Technicals portfolio on Stockpickr.
-- 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.