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Must-See Charts: Baidu, Wal-Mart, PetroChina - 43918 views
BALTIMORE (Stockpickr) -- Trading was largely mixed yesterday, even as continued overseas news and horrendous housing data threatened to shake stocks lower. Ultimately the S&P 500 ended Wednesday slightly higher -- just shy of our key 1,300 level -- on the backs of a number of constituents who managed to post mid-single-digit gains on good fundamental news. That’s a good sign for U.S. investors right now.
Even if auspicious signs start popping up on Wall Street as we end March, uncertainty still rules the financial markets right now. And when uncertainty rules, it’s best to turn to the technicals.
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.
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Every week, we take an in-depth look at three large-cap stocks that are telling important technical stories right now. Here’s a glimpse at this week’s stocks.
For Chinese web search giant Baidu.com (BIDU), 2011 is kicking off to one very impressive start. Shares have already rallied more than 37% since the first trading day of the new year, outpacing the broad market by a factor of 11. Now a bullish breakout to new highs is waving the "buy" signal for this stock.
Baidu’s ascent from the first day in January has been far from linear. Shares have rallied, reversed, gapped and failed more than a few times in those trailing three months. But in the process of that messy price action, the stock has developed well-defined pockets of support and resistance -- price levels where an abundance of supply or resistance lie for a stock, stifling a move beyond them. That makes a buy signal in Baidu considerably easier to spot.
This stock failed to sustain a move above the $130 level on its previous attempt back in February. Yesterday, though, shares managed to stage a break above those previous highs. With that upside barrier taken out, the ideal buying opportunity comes on an open above that level. Keep a protective stop underneath that upper blue line.
The same gains can’t be said of super-retailer Wal-Mart (WMT) -- shares of the Bentonville, Arkansas-based firm are down more than 4% this year. That said, a staunch support level at $51.50 should give investors in this big box retailer some downside protection in this market.
Already, shares of Wal-Mart have bottomed twice at $51.50, and now they’re threatening to stage a triple-bottom at this level. The triple-bottom is a strong (albeit rare) reversal pattern that’s normally taken as a bullish signal by traders. In the case of the double-bottom that preceded it, the buy signal was never met because shares failed to push above the intermediate peak before turning down for a third attempt at support. We need to see that resistance level broken before it makes sense to go long.
That fact is accented by the presence of 200-day moving average resistance slightly above current share price levels. The first barrier for a bullish run on Wal-Mart is going to be a close above the 200-day. I wouldn’t become a buyer of this stock until it did that.
Wal-Mart is a top holding of in Warren Buffett's portfolio, at 4% of the total portfolio, and was one of 8 Top George Soros Stock Buys in the most recently reported period. It's one of the 20 Highest-Yielding Retail Stocks and was one of several stocks that increased their dividend payouts recently.
A lot of attention continues to be on oil right now as experts speculate about prices six months to a year from now. All the while, oil stocks such as PetroChina (PTR) are seeing increased attention from traders trying to catch a strong move higher. But while eyes are on this stock, traders should really be looking on either side of its price channel right now.
That’s because the near-perfect sideways action in shares of PetroChina gives us an easy-to-call if/then trade for this stock. If shares break above their consolidation channel into the green box, then it’s time to buy. If, however, shares break down into the red, then it’s time to bet against shares. Upside bias makes the green box especially worth watching right now -- especially as share prices approach it.
If you decide to take either side of the trade, keep your protective stop just inside the consolidation channel.
With a B buy rating, PetroChina is one of TheStreet Ratings' top-rated oil and gas 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.