Last up is Indian IT services firm
(WIT - Get Report)
, a stock that's dropped more than 18% year-to-date. Even though WIT's price action so far in 2012 has been less than auspicious, this stock could be ending the year on a high note -- here's what to look for.
Right now, Wipro is forming a double bottom, a reversal pattern that's formed by two swing lows that hit a price floor at approximately the same level. The buy signal comes when shares push through the resistance level that separates the two bottoms; for WIT, the price is $9.25. Until that price gets taken out, this stock is still definitively in a downtrend.
In a reversal, it's tempting to try to catch a stock like WIT when it's at an extreme -- like the bottom that shares put in at the start of November. But that doesn't mean you should do it. When you try to catch a low, you're consciously buying a stock when it's at its weakest; that's an incredibly difficult time to get right consistently. Instead, by waiting for WIT to move above its $9.25 breakout level, we get to see if this stock can still catch a bid above a previous price ceiling before we jump into shares.
As a trader, remember to buy strength, not weakness.
To see this week's trades in action, check out the
Technical Setups for the Week portfolio
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