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TheStreet Open House

5 Trades to Take as Stocks Soar in May

Reed Elsevier

We're seeing the exact same setup forming in UK-based data company Reed Elsevier ( RUK). For RUK, the breakout level to watch is $47, which is the resistance level that's been acting like a price ceiling for shares since the end of March. A breakout above $47 means that it's time to start buying.

>>5 Stocks Rising on Unusual Volume

Whenever you're looking at any technical price pattern, it's critical to think in terms of buyers and sellers. Triangles, rectangles and other pattern names are a good quick way to explain what's going on in this stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.

That resistance line at $47, for example, is a price where there's an excess of supply of shares; in other words, it's a place where sellers have been more eager to take recent gains and sell their shares than buyers have been to buy. That's what makes the breakout above it so significant; a breakout indicates that buyers are finally strong enough to absorb all of the excess supply above that price level.

At first glance, one thing that's obvious in RUK's chart is the abundance of gaps. Those gaps may make the chart look somewhat less well defined than that of CAG, but they can be ignored for all intents and purposes. Those gaps, called suspension gaps, occur because Reed Elsevier's shares trade off U.S. hours on the London and Euronext stock exchanges. From a technical standpoint, they're not significant.

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