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5 Trades Getting Ready to Pop This Week

Stocks in this article: VMAJPMCMCSASNY

JPMorgan Chase

The sole negative setup today comes from shares of banking giant JPMorgan Chase (JPM). JPMorgan has been rallying alongside the rest of the financial sector for the last year and change, pushing to new 52-week highs as recently as early March. But now, JPM is starting to look "toppy" thanks to the early stages of a head and shoulders pattern forming in shares.

The head and shoulders is a price pattern that indicates exhaustion among buyers. The pattern is formed by two swing highs that top out around the same level (the shoulders), separated by a bigger peak called the head; the sell signal comes on the breakdown below the pattern's "neckline" level, which is right below $47. While the size of the pattern indicates that it's likely to be more of a correction than an outright bloodbath in JPM's shares, it's definitely worth heeding for investors who've been considering buying into this stock's recent rally.

Momentum adds some extra confirmation to the downside setup in shares of JPM -- 14-day RSI saw its uptrend get broken back in early February, when the left shoulder started forming. Since momentum is a leading indicator of price, that doesn't bode well for shares. Still, I'd only recommend actively betting against shares if we see the breakdown below $47 happen. Otherwise, a move above $51 cancels out the bearish potential in JPM.

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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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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