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Must-See Charts: Ford, Wells Fargo, Time Warner - 36179 views
BALTIMORE (Stockpickr) -- The first week of February is panning out well for stock investors. Broad market indices are showing around 2% gains across the board this week, a welcome addition to the market’s multi-month rally. More significantly, the S&P 500 showed a confirmed move above a key resistance level of 1300 yesterday, a technical move that points to further gains for stocks ahead.
It’ll be key to watch 1300 for the rest of the week. If the S&P can build a base and stay above that level through Friday’s close, the prospects of the market’s next rally leg become a whole lot less tentative.
But while the market continues to keep investors on the edge of their seats, we’ll turn to the technicals to see what’s happening with Wall Street’s biggest names right now.
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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.
One of yesterday’s biggest market moves came from media giant Time Warner (TWX), the firm behind cable channels such as CNN and HBO, film studios such as Warner Bros. and magazines such as People and Sports Illustrated. Shares of the company gained 8.6% on the day following earnings that beat expectations and guidance that suggested money was flowing back into media stocks. That price gain is significant for another reason too -- it brings Time Warner to a new technical breakout level.
Time Warner’s price action yesterday took shares from a low of $32.54 all the way through previous resistance at $34. It’s the break above previous resistance that’s so important -- it suggests that shares of the company will continue to perform strong in the near term so long as shares can hold up above their newfound support level.
It’ll be key to see where shares of Time Warner open today -- and whether they’ll bleed off some momentum by retracing back down to support at $34. If they do, investors should take that as a strong signal to buy shares. Either way, if you do decide to go long right now, keep a protective stop just below $34 to defend against a bearish sentiment swing.
As of the most recent reporting period, Time Warner is a holding in the portfolios of Bill Miller at Legg Mason Capital, at 2% of the total portfolio, and Brian Rogers at T. Rowe Price Equity Income Fund (PRFDX). It was one of Credit Suisse's 18 best stock picks for 2011, while Jason Notte indentified it as one of
several companies with the potential for bankruptcy.
Ford (F) is one stock that’s been getting a lot of attention recently -- albeit for all of the wrong reasons. Despite improvements in the automaker’s performance in the last quarter, fundamentals fell short of Wall Street’s lofty expectations, and a selloff has since ensued. Now, though, could be a great time to go long shares of Ford.
That’s because the selloff really wasn’t predicated on any sort of negative news. In fact, it came as the result of the company’s biggest profits in a decade. The last time we looked at Ford as a Must-See Chart, the focus was the ascending triangle breakout that had just taken hold (and ultimately provided nearly 12% gains by the time Ford gave a “sell” signal with its double-top). Now though, the key is going to be in determining where shares ultimately settle.
There are two key support levels in shares of Ford right now: S1, the weaker of the two, is essentially precisely at Ford’s close yesterday. S2, the stronger, sits at $14.50. 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. Consider placing a stop below $14.50.
One of Ford's big bulls is Ken Heebner at Capital Growth Management, whose portfolio was 12.2% weighted to Ford as of the most-recent period. Ford is one of Goldman's 11 top consumer stocks for 2011, and according to Dirk van Dijk, chief equity strategist at Zacks, it's one of several stocks to ride a recovery. With a C+ buy rating from TheStreet Ratings, Ford is one of the top-rated automobile stocks.
While banking stocks have been a bit of a mixed bag this earnings season, an interesting technical setup in Wells Fargo (WFC) could spell a definitive move higher in February.
For the last several weeks, Wells Fargo has been trading sideways in a consolidation channel. The sideways price action was acting as a way for the stock to bleed off some overbought momentum following a 26% push higher in the last month. The question, though, was which direction Wells would choose in 2011.
It looks like it picked continued bullishness this week, following Tuesday’s break above channel resistance. Yesterday’s trading confirmed the move higher. If you decide to go long this bank, keep an eye on that channel -- now it’s a strong support level for WFC.
Wells Fargo shows up in the portfolios of David Tepper's Appaloosa Management and John Paulson at Paulson & Co.. According to Maria Woehr, Wells is one of 10 banks growing tangible book value as well as
10 banks poised to profit from rising interest rates. Jim Cramer recently identified Wells Fargo as one of the winning stocks in the bank sector.
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.