This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
TheStreet Open House

5 Breakout Trades to Profit From the 'January Effect'

Stocks in this article: WMTXOMAUQBWACLH

The buy signal for WMT comes on a breakoutabove the upper trendline. Obviously, this isn't a setup that you want to get in on early, since a stock can continue to fall within the wedge while investors wait for a breakout. That said, when the move happens, traders will want to take heed.

Expect momentum to be an early tip off to the move in price.

Exxon Mobil

We're seeing the same setup in another giant stock: Exxon Mobil (XOM). Even though these two businesses couldn't be more different, a quick glance at the two charts makes it clear that they've been trading almost identically for the last couple of quarters. That's not hugely surprising; they're both S&P 500 components, and their correlations are extremely high as a result of that. For traders, that just means that there's another falling wedge trade in play night now.

In Exxon, the setup works the same way. The stock has been moving in a downtrend, but the trendlines defining the moves are convering -- in other words, the stock is falling, but it's falling at a diminishing rate. The move above the upper trendline marks a buy signal in this stock too.

Momentum tells a slightly fuller picture in this stock. As with WMT, 14-day RSI has been bumping up against a downtrend of its own that's likely to break out ahead of the price move. But the fact that longer-term momentum is actually in an uptrend (the dashed grey line) is bullish. No matter what happens, it's critical to wait for the price breakout to happen before putting real money on the line -- after all, you can't make gains off of RSI, just price.

AuRico Gold

The last few months have been a lot more positive for shares of Toronto-based AuRico Gold (AUQ): shares of the mid-cap gold miner are up more than 25% in the last quarter. That, incidentally, is a whole lot better than spot gold has fared over the same period of time. But AUQ looks poised to head even higher in the near-term thanks to the technical setup in shares right now.

2 of 4

Check Out Our Best Services for Investors

Action Alerts PLUS

Jim Cramer and Stephanie Link reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

Jim Cramer's protégé, David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
Try it NOW
Try it NOW
Try it NOW

Check Out Our Best Services for Investors

Dividend Stock Advisor

Jim Cramer's protégé, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
Try it NOW
Try it NOW
Try it NOW
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,399.67 +19.26 0.12%
S&P 500 1,904.01 +17.25 0.91%
NASDAQ 4,316.0740 +57.6360 1.35%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs