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Must-See Charts: Apple, Ford, SPY - 43461 views
BALTIMORE (Stockpickr) -- Despite the S&P 500’s breather yesterday, the broad market continues to be in rally mode following last week’s critical push above resistance. Much of that upward momentum has been fueled by earnings season, which continues to roll on this week. Earnings are a primary catalyst for investor sentiment -- and when companies report strong numbers across the board, investors become willing to buy risk assets (such as stocks) once again.
But the fundamentals (such as earnings) only tell part of the story.
More often than not, successful traders primarily take cues from the technicals -- and the best way to see those is with a chart. 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.
S&P 500 SPDR ETF
First up this week is an NYSE issue that’s not just valuable to look at as a potential investment -- it’s also crucial because of its use as a major proxy for the broad market. I’m talking about the S&P 500 SPDR ETF (SPY).
SPY is the oldest exchange-traded fund on the market, and it’s also consistently one of the highest-volume issues on the NYSE. So what’s going on in this ETF right now, and what can we expect for stocks in the near future?
At present, SPY is sitting pretty, having just cleared a key resistance level, now S1, at 130 (1300 on the S&P 500 Index). That move clears any upside barriers for equities up until 140 -- a sign that the rally we’ve been seeing in February is only part of the way complete.
But make no mistake: That doesn’t mean that SPY will move straight to 140; it just means that the path of least resistance for stocks will be between 130 and 140 in the near-term.
On the downside, we’ve got several support levels (S2, S3 and several below that) that significantly reduce any risks of a broad selloff in stocks right now. It’s important to remember that technical analysis isn’t a predictive tool; it’s a tool that helps traders create contingent expectations based on the market’s behavior. Simply put, that tells us that we can could on a rally if SPY stays above 130, and a selloff to 127.5 if we fall below 130.
As of the most-recent reporting period, SPY comprised 8.2% of Moore Capital's portfolio.
Meanwhile, the hot news on Wall Street has a lot to do with today’s launch of Apple’s (AAPL) iPhone on Verizon (VZ). Not surprisingly, the iPhone has already proven to be Verizon’s most successful product launch to date -- and a significant portion of the carrier’s customers are considering switching to the incredibly popular device. While analysts are predicting continued success in Apple’s shares, the technicals are telling an interesting story of their own.
On Monday, shares of Apple triggered an ascending triangle pattern following a close above resistance at $350. The ascending triangle is a pattern that’s characterized by a strong overhead resistance level and higher lows. As shares bounce between those levels, they have the potential to get squeezed above the resistance level. In Apple’s case, shares have been in breakout mode all week -- and despite shares trading slightly lower in the pre-market, they should continue on that bullish bent.
If you decide to go long Apple, consider placing a protective stop just above Friday’s close to avoid having this trade move against you.
As of the most-recent reporting period, Apple comprises 11% of Tiger Global Management's portfolio. George Soros increased his position in the stock by more than 13% during the period. Jim Cramer recently cited Apple's recent highs as one of the reasons he's still a bull.
Ford’s (F) been getting a lot of attention recently, and I wanted to take a look at where this stock sits technically now since we looked at it last week. In the chart above, I’ve recreated the exact same annotations that were in last week’s chart -- only now, we’re able to see if our expectations played out.
Last Thursday, the synopsis was that, “With Ford looking fairly positive at S1 recently, today could be a good chance to go long this automaker. Consider a small position to test the waters, and go full size on confirmation of the bounce.” Sure enough, shares of Ford did bounce at S1, giving traders a prime opportunity to play the support level. I suspect that part of the reason why Ford bottomed at its first support level is that the stock was clearly oversold following otherwise strong earnings in late January.
So how should you play Ford now? Given that shares are midway between S1 and resistance above, this isn’t an ideal entry point. While momentum would suggest Ford will continue to move toward that resistance level, I wouldn’t be a buyer here. If you still hold shares of Ford, consider holding for the move up to $17, but keep a tight trailing stop to protect your recent gains.
As of the most-reporting period, Ford was a top holding of Ken Heebner at Captial Growth Management. During that period, D.E. Shaw increased its position in Ford by 660.2%. Ford is one of Goldman's 11 top consumer stocks for 2011 and is one of TheStreet Ratings' top-rated automobile stocks.
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.