There was a lot of noise on Wall Street this week.

We had earnings reports from tech giants such as Apple (AAPL) , IBM (IBM), Google (GOOG) and Microsoft (MSFT) . On Tuesday, we saw the Dow Jones Industrial Average drop the most in history for an inauguration day as President Barack Obama took over the White House. And this week, we also saw huge volatility in the banking sector after the Royal Bank of Scotland (RBS) said it may have lost $41 billion last year, prompting the British government to announce a second bailout for the company.

Investors often get overwhelmed by everything that is happening on Wall Street, leading to a clouded mind when it comes to making sound investment or trading decisions. One way to lift those clouds is to focus on an investment discipline called technical analysis. Technical analysis is a stock analysis method that is used to forecast the future of financial price movements based on the examination of past price movements.

Many traders and investors use technical analysis to make investment decisions. However, some don’t subscribe to the practice, calling it “voodoo” or a “pseudoscience.” Pure technical analysts believe it is pointless to do fundamental analysis -- the process of analyzing companies’ financial statements and health, its management and competitive advantages, and its competitors and markets.

Whether or not it’s pointless is best left for debate among the academics. One sure fire way to drowned out all of the noise on Wall Street is to simply focus on the chart of a stock that you might be considering to buy or sell. The chart is nothing more than snapshot of the behavior of the sellers and buyers at any given time. Think of it as the living pulse of the company.

With that in mind, let’s take a look at some charts that are displaying some interesting patterns and might be setting up to make a big move.

First up is Intuitive Surgical (ISRG). This company is engaged in the designing, manufacturing and marketing of the da Vinci Surgical Systems. On Wednesday, the company reported that fourth-quarter sales were up 5% to $113.7 million, but its 2009 earnings forecast missed Wall Street expectations. As you can see from the chart below, the stock is in a clear downtrend since October of 2008.



Source: StockCharts.com

From a technical standpoint this chart is clearly broken and is experiencing distribution on heavy volume. The 30-day average volume is around 1.3 million shares and on Thursday the stock traded 2.5 million, a 92% jump in change of volume. That is some serious selling pressure!

Shares of ISRG are now approaching some support set back in April of 2006 at around $85 a share. If the stock breaks this support level it could be heading significantly lower. Even from the current price of $96 a share, the stock has 10 points to fall to hit the $85 target, which would make for a very nice trade.

Next up is Commerce Bancshares , a bank holding company that conducts its principle activates through its banking and non-banking subsidiaries from approximately 350 locations throughout Missouri, Kansas, Illinois, Oklahoma and Colorado.

On Tuesday, Commerce Bancshares reported a 13% fall in non-interest income and a nearly three-fold rise in provisions for bad loans. Shares of Commerce Bancshares have just broken a key level of support at around $35 a share and are hitting new 52-week lows. Volume is also picking up to the downside. The average 30-day volume is 474,000 shares and on Thursday 569,648 shares traded, which represents a 20% increase in change in volume. The technical breakdown on the chart below is very significant because it represents a breach of support dating back three years.



Source: StockCharts.com

Another stock worth considering for a chart play is ITT Educational Services (ESI). This company is a provider of postsecondary degree programs in the United States based on revenue and student enrollment. On Thursday, the company reported a 30% jump in fourth-quarter profit, beating Wall Street expectations.

The educations stocks, as a group, have been some of the best performers of late as people return to school to gain new skills and enhance their existing competencies due to the weakness in the jobs market. Shares of ESI are in a very strong uptrend and are approaching all-time highs at around $132 a share. If this stock can break out it will have no overhead resistance and will be firmly in the hands of the bulls. Volume is also exploding with the 30-day average volume at 1,522,000 and Thursday’s volume clocking in at 5,292,004 shares, which is a 247% increase in change in volume. The uptrend in ESI is rather remarkable when you consider that the rest of the market is clearly in bear territory.



One last stock you might be interested in putting on your trading radar is Adobe Systems (ADBE) , a diversified software company. Adobe came under selling pressure on Thursday following the bearish earnings report out of competitor Microsoft. Shares of Adobe are hitting 52-week lows and the stock is finally breaking below a trading channel from back in November. A channel is when a stock trades within a certain range between high and low price points for a period of time (see the chart for more clarification).



Volume to the downside is also heavy on the software developer. The 30-day average volume is 9,810,000 shares and on Thursday the stock traded 13,904,203 shares, which represents a 41% jump in change in volume. On Wednesday, an analyst from Soleil started coverage on the stock with a buy rating and a $27 price target. From a technical standpoint, this analyst must have forgotten to look at the breakdown and negative chart pattern.

Posted on Jan. 23, 2009