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5 Big Stocks to Trade for Gains

Xerox

Last up is Xerox (XRX - Get Report) the $10 billion IT and document solutions firm that's achieved household name status. Like Netflix, shares of Xerox have been atrophying over the last year or so, dropping around 8% since the first trading day of 2012. But also like Netflix, this stock is showing traders a setup that could turn the decline around.

The pattern in Xerox is an inverse head and shoulders, a pattern that's formed by three swing lows in a stock's price chart. The outside two, the shoulders, come in at approximately the same level, and they're separated by the head, a lower trough in the pattern. The buy signal comes when the neckline gets broken. While XRX's neckline is sloped, it's positioned at approximately $7.80 right now.

The inverse head and shoulders is a well-known pattern that tends to be a very reliable setup in spite of (or maybe because of) its popularity: a recent academic study conducted by the Federal Reserve Board of New York found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in "profits [that] would have been both statistically and economically significant."

Don't buy until the neckline gets taken out. XRX is still in a downtrend until then.

To see this week's trades in action, check out the High Volume Technicals for the Week portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

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At the time of publication, author had no positions in stocks mentioned.

Jonas Elmerraji 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.
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SYM TRADE IT LAST %CHG
BAC $16.36 0.00%
CNP $18.82 0.00%
NFLX $117.63 0.00%
SPY $199.28 0.00%
XRX $10.31 0.00%

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Chart of I:DJI
DOW 16,643.01 -11.76 -0.07%
S&P 500 1,988.87 +1.21 0.06%
NASDAQ 4,828.3250 +15.6170 0.32%

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