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5 Trades to Profit From the Selloff

BALTIMORE (Stockpickr) -- Operation Twist is having the unintended consequence of wringing any bullish sentiment out of the market this morning -- not exactly what the Fed had hoped for when it announced its plan yesterday afternoon.

Simply put, investors were expecting a big action from the Fed to help the economy. Instead, what we got was Operation Twist, a half-measure that was both completely expected and thought to be marginally effective at best (even if it's providing a perfect trade in an ETF I talked about on Tuesday). The biggest shock from the Fed might just be their lack of any shock at all.

It's not exactly surprising that stocks are selling off this morning. Market participants expected the Fed to kick the door down with guns blazing; instead, they just kicked the door down and ran off. From a technical standpoint, timing could have been better too.

Related: 5 Technical Setups for Breakout Gains

Right now, the S&P 500 is a hair's breadth away from testing trend line support off of Aug. 8 lows; a breakdown below that support level will be a seriously bearish signal for investors. Barring the Fed's actions yesterday, I'd have said that a bounce off of support was the high-probability scenario in the S&P 500. Now I'm not so sure.

Even so, a number of technical trading setups are taking place in some of Wall Street's biggest-name stocks. Even if the floor falls out of the market, these names could show us some gain potential. In case you're new to technical analysis, here's the executive summary:

Technicals are a study of the market itself. Since the market is ultimately the only mechanism that determines a stock's price, technicals are a valuable tool even in the roughest of trading conditions. Technical charts are used every day by proprietary trading floors, Wall Street's biggest financial firms, and individual investors to get an edge on the market. And research shows that skilled technical traders can bank gains as much as 90% of the time.

Every week, we take an in-depth look at large-cap stocks that are telling important technical stories. Here's this week's look at the technicals of five must-see stocks.

Stock quotes in this article: AAPL, LYG, ALU, PEP, DISH 

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