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5 Trades to Take as Stocks Soar in May

Stocks in this article: CAG LUX MFG RUK VMW

Mizuho Financial Group

It's been a good year for large-cap Japanese bank Mizuho Financial Group ( MFG). Shares of the bank have rallied more than 18% year-to-date and more than 36% in the last six months. Now the pattern that's been forming in shares for most of 2013 points to even more upside for shareholders of MFG.

>>5 Stocks Set to Soar on Bullish Earnings

That's because Mizuho is currently forming an inverse head and shoulders pattern. The setup, which indicates exhaustion among sellers, is formed by two swing lows that bottom out around the same level (the shoulders), separated by a bigger trough called the head; the buy signal comes on the breakdown above the pattern's "neckline" level, currently right at $4.50.

Even though the setup in MFG isn't exactly textbook -- inverse head and shoulders patterns typically occur at the bottom of a downtrend, not the top of an uptrend -- the trading implications are exactly the same. When the sellers sitting atop $4.50 get taken out, it makes sense to be a buyer. Keep a protective stop just below the right shoulder at $4.20.

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