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5 Trades to Profit From a January Rally

VMWare

Last up today is VMWare (VMW), a stock that's been getting ready for a reversal. Even though VMWare posted decent returns in 2012, the stock has been trending lower since early April. But a double bottom pattern in shares suggests that this stock could be about to make more upside progress in 2013.

A double bottom is a price pattern that's formed by two swing lows that bottom out at approximately the same price level. The two bottoms are separated by a peak that marks that resistance level for the setup. A breakout above that price (right around $100 for VMW) is the buy signal for shares.

$102.50 is actually the top of the peak for this stock, but the lower price means more for this trade. The fact that VMW's resistance comes in at $100 is significant: big psychological price barriers like $100 can often act as stumbling blocks for buyers, so if VMW can overcome resistance there, buyers have a doubly strong signal.

Momentum adds some extra confidence to this trade -- 14-day RSI has been trending higher since the second bottom started forming. If you decide to be a buyer when the $100 breakout happens, it makes sense to keep a protective stop just under the bottom of the price pattern.

To see this week's trades in action, check out the Technical Setups for the Week portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

Follow Stockpickr on Twitter and become a fan on Facebook.

Stock quotes in this article: VMW, V, SIG, SNA, WTW 

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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