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Must-See Charts: MetLife, Toyota, QQQQ - 47228 views
BALTIMORE (Stockpickr) -- It’s time for traders to welcome back volatility.
While absent from the market for the last several months, volatility, as measured by the VIX Index, is creeping back into the stock market in March. Already, the VIX is sitting at levels not seen since back in November, fueled by rising oil prices and uncertainty in the U.S. equity market. Even so, volatility need not be something to fear; instead, many traders are embracing it.
That’s because the volatility itself is significantly less of a concern than the direction that those increased swings could push stocks. For that reason, it’s time to take another technical look at some of the biggest-name stocks on Wall Street.
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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Here's this week's look at how some of the biggest names on Wall Street are trading technically.
A 148 million share offering sent MetLife (MET) down significantly yesterday, ostensibly bringing an end to the nearly 20% rally that shares had seen in the last year. Now, with pricing locked in for the new block of shares, investors are wondering what the near-term future will hold for this $43 billion insurance giant. The technicals suggests that share prices face challenges to make up for the gap.
At the start of the week, shares of MetLife had been sitting atop two key support levels (S1 and S2 in the chart above) -- downside barriers that act as a sort of price floor for shares. But the offering sent shares to open below both, a move that means both of those previous support levels are now resistance levels for the stock.
Right now, MetLife is trading in a channel that’s considered a high-probability range for the stock; in other words, it’s the area that shares are able to freely move inside without interference from large pockets of buying or selling. While the actionable trade in MetLife isn’t there right now, a downside play could emerge on a crack below $43. Until then, I’d suggest staying away from this is stock despite its high profile move this week.
As of the most-recent reporting period, MetLife was one of the top holdings of Richard Snow's Snow Capital, comprising about 3% of the total portfolio. The stock showed up on a list last month of 18 big bank dividend prospects.
An equally ominous signal is being sent by Japanese automaker Toyota (TM). Toyota has had a relatively rough year on the heels of recall drama and slipping consumer confidence about the brand’s quality. Even so, shares have rebounded in the last several months, climbing above their pre-recall highs. But those gains may be short lived.
Shares of Toyota look like they’re forming a fairly strong double-top right now, a bearish pattern that suggests a longer-term reversal is due in shares. Right now, the stock’s resistance level (or top) is right at its 52-week high of $93.90 -- with support (also known as its neckline) at $88 and change. It’s the fall below $88 that triggers full-on selling in this pattern.
That said, until the $88 level is broken though, this stock could easily change its mind. If you’re planning on taking part in a short trade on Toyota, I’d recommend waiting until there’s a confirmed slide below $88. Then, consider a protective stop at $90.
With a C+ hold rating, Toyota is one of TheStreet Ratings' top-rated automobile stocks.
With all of the attention being paid to the market right now, it makes sense to take a look at what’s going on in tradable, broad market indexes. One of the most heavily traded is the PowerShares QQQ Trust (QQQQ), which tracks the performance of the Nasdaq-100 Index. Right now, a bearish pattern could mean lower prices in “the Qs” -- and in the large Nasdaq stocks that it represents.
A bearish head-and-shoulders top in QQQQ could be a signal for selling, but only if it triggers on a slide below support, currently at the 50-day moving average. That confirmed break of support is crucial (as with Toyota, above) because a more bullish bounce above support is no less likely right now -- one suggests more of the same, while the other sends a more ominous sign.
To be sure, the size of this pattern suggests that a downward break wouldn’t be a massive crash, but it would be big enough to justify taking the trade. That said, as usual, don't bet against the market's rally until a break of the 50-day moving average is confirmed.
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.