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5 Huge Trades for a Volatile 2013

Stocks in this article: GMGOOGJNJMRKT

Google

Finally, Google (GOOG) is showing traders the exact opposite pattern right now. The inverse head and shoulders is exactly what it sounds like: it's a head and shoulders top that's been flipped upside down. Naturally, then, it's an upside setup.

For Google, the pattern is smaller than the one in Merck -- that means that the trading timeframe is a bit shorter too. More importantly, GOOG broke out above its neckline on Monday, signaling a buy in this stock just as big indexes are going to test their 52-week highs this winter; Google's on track to do the same. Shares haven't made much of a move off of the neckline yet, a fact that makes to day a good buying opportunity. If you decide to jump into Google here, I'd recommend a protective stop right at the 200-day moving average.

Lest you think that the head and shoulders is too well known to be worth trading, the research suggests otherwise: 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."

That's a good reason to pay attention to the setups in GOOG and MRK right now.

To see this week's trades in action, check out this week's Must-See Charts portfolio on Stockpickr.

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

Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation.

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