By Jonas Elmerraji
Posted on March 18, 2010
Short sellers beware; stocks are seeing a buyer’s market this week. Now that the S&P 500 and the Dow Jones Industrial Average have cleared major resistance levels -- at 1150 and 10,700 respectively -- investors seem to be comfortable being bullish once again, whether or not they should be. Case in point: this week’s big name technical charts.
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.
Every week, Stockpickr analyzes the technicals for some of Wall Street’s highest-volume stocks and takes a look at how to trade them. Here’s this week’s look at how some of the biggest names on Wall Street are trading technically.
When it comes to big-name stocks, it doesn’t get much bigger than oil giant Exxon Mobil (XOM). But the $318 billion company could be on the verge of getting even bigger thanks to a bounce shares took just two trading sessions ago.
Economic tailwinds are already pushing at Exxon’s back. The company’s thick margins and impressive operational performance have already carved out a special place among the oil industry’s supermajors, and now, with the company’s acquisition of XTO Energy, a powerful entrance into the natural gas market should shake up the competiton in a meaningful way.
But fundamentals aside, Exxon’s chart has been seeing some shakeups of its own. Most significantly, shares bounced up off their 50-day moving average this week, prompting a bullish move upward toward resistance at the 200-day moving average. That upside target should catch enough traders’ attention to catalyze a quick move upward. Watch closely for a breakout above the thin red line.
Now onto another commodity titan: Alcoa (AA). Alcoa’s increased focus on higher-margin aluminum products has been slow going in 2010, and shares are down double digits since Jan. 1. But a breakout in yesterday’s trading could leave this stock set up for a serious upside pop in the next week.
Alcoa starting forming an ascending triangle -- a bullish pattern characterized by a set resistance level and higher lows -- back in February. But it wasn’t until yesterday that shares actually staged their breakout, with strong economic data as the catalyst.
Shares of Alcoa don’t face another meaningful price ceiling until $17, so expect traders to be watching shares intently for the opportunity to snag a nearly 18% gain quickly. Wait for a second consecutive open above the horizontal blue line before going long yourself.
Another breakout story has been shaping up in Intel (INTC) this week, as shares of the chipmaker broke out to a new 52-week high following product launch details.
A 52-week high is a significant technical phenomenon for a stock, because it means that shares of a company don’t face any overhead resistance levels or stumbling blocks that could impede price movement. I’d expect shares to continue to move higher in the next week, particularly given the direction of the broad market indexes of late.
To see this week’s trades in action, check out the High Volume Technicals portfolio on Stockpickr.
