Last up is Annie's (BNNY), a stock that went public last year, effectively staying flat for the majority of 2012. Since the Fall, however, Annie's has slid around 16% while the broad market ticked higher. Despite that underperformance, a reversal pattern in shares points to a rally in this natural foods company in 2013.
BNNY is currently forming an inverse head and shoulders pattern, a setup that's formed by two swing lows at approximately the same level (the shoulders) that are separated by a deeper low (the head). The pattern indicates exhaustion among sellers, with a buy signal that comes on a breakout above the stock's $38 neckline. Momentum adds some extra confidence to this trade. 14-day RSI broke its downtrend in early December, and the momentum gauge has been in an uptrend ever since.
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 this recent IPO right now. 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.
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