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3 Technical Setups for the Week

Stocks in this article: UGP ELP SMG

Ultrapar Participacoes

For Brazilian fuel distributor Ultrapar Participacoes (UGP), the last year has been a strong one for shareholders. All told, shares of the company have rallied 40% in the trailing 12 months, current 2.35% dividend yield excluded. But while UGP is hitting its head on resistance right now, there appears to be some near-term upside in shares.

Shares of UGP initially hit $66 resistance back in October 2010. Since then, they've managed to hit that level two other times, bouncing back to support just below $60 each time. But it's that predictable support and resistance channel that sets UGP up as a high-probability technical setup this week. Now that the stock has bounced down to support, this could be a strong buy on a bounce.

If you're considering taking this trade, wait for the first white bar before going long. This trade doesn't make sense until support gets confirmed once again at $59 and change. When the bounce does happen, consider a protective stop just below support. That keeps your risk to less than 2%, while the $66 price target suggests 10% upside in the next month.

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