Must-See Charts: BAC, SLV, XOM
BALTIMORE (Stockpickr) -- Stocks are continuing sideways this week as investors decide what to do with the fickle market heading into 2011. Last week's push higher took the S&P 500 from one key level -- support at 1175 -- to another -- resistance at 1230. That current positioning is having a palpable impact on the market right now. The VIX Volatility Index has dropped more than 15% since last Thursday's open, a sign that investors are pricing less volatility into S&P companies right now.
At the same time, the bond market is getting shellacked as yields continue to climb. That lack of performance in fixed income is spurring a "flight to risk" that should help to buoy equity prices as we close the year.
What does that mean for some of the most heavily traded stocks on Wall Street? Let's take a technical look.
In case you're not familiar, technical analysis uses a stock's price movements to determine where shares are headed in the future. Technical charts are used every day by proprietary trading floors, the Street's biggest financial firms and individual investors to get an edge on the market. And according to some sources, skilled technical traders can bank gains as much as 90% of the time.
Here's this week's look at how
some of the biggest names on Wall Street
are trading technically.
As one of the most heavily-traded stocks on the
NYSE
,
Bank of America
(BAC) - Get Report
makes regular appearances on our technical watch list. In fact, thanks to an especially interesting outlook, I'm bringing this chart out for the
.
Last week, with shares of this $121 billion bank at $11 support, we bet on a bounce higher for investors. Sure enough, we got a nearly picture-perfect 9.1% bounce back up to resistance -- and a very good indication of what's to expect for December.
Bank of America is currently right at $12 resistance right now and primed for a move back down to support. That trend line resistance is strengthened by the intersecting 50-day moving average, which means that this stock will need a significant sentiment change in order to hold any sort of move above $12.
Downward pressures could be exacerbated by speculation that
Wikileaks is set to release damning documents about BAC's mortgage business
-- although the site hasn't confirmed that this bank is the subject of the leaked documents, traders are already beginning to price those risks into shares.
As with any trade, we'll want to see the first signs of a bounce before actually taking the trade. If you decide to short BAC, I'd suggest placing a protective stop a bit above $12.25 to preserve your capital if shares don't cooperate.
The
iShares Silver Trust
(SLV) - Get Report
has been getting considerable attention of late, thanks in large part to the 67% rally shares have undertaken since the first trading days of January.
Precious metals have been on a tear in 2010
-- especially silver, which has lagged gold in its ascent. That's proven a hard pill to swallow for investors: While gold does claim societal prominence, silver's huge industrial usage makes it an in-demand, depletable resource.
So with shares of this physical silver ETF significantly higher than they started this year, does it make sense to buy now?
Absolutely. Despite a fairly strong selloff during the past two trading days, SLV is finally touching downside support at $27, a level at which shares of this
should have trouble falling below. As a result, support should provide traders with a strong enough base for a move back up to retest the fund's high of $30 at Tuesday's open.
Consider taking on a starter position on the first confirmation of a bounce off of $27. The high-probability upside on this trade is limited to $30. Traders hoping for a move beyond that are making more speculative bets.
$362 billion oil supermajor
Exxon Mobil
(XOM) - Get Report
may have only seen 5% of price appreciation overall in 2010, but market flux has helped the stock rally more than 18% in the last quarter, attracting traders on the lookout for some kind of discernable trend. This week, a potential breakout in shares could be on the horizon.
Yesterday, shares of Exxon continued to flirt with resistance at the stock's
of $73.56 -- but as of yet, the stock has yet to give traders a clear
. When it does, though, expect a swift hike in shares.
It's currently unclear whether that breakout will happen on this attempt, or whether shares will take another trip to support first. As a result, consider setting an alert for a break above $74, and ignore this
until it triggers.
When (and if) it does, consider going long the breakout with a protective stop right around $71.
To see this week's trades in action, check out the
High Volume Technicals 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, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including
Forbes
and
Investopedia
, and has been featured in
Investor's Business Daily
, in
Consumer's Digest
and on
MSNBC.com.
Jonas Elmerraji is the editor and portfolio manager of the
Rhino Stock Report
, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including
Forbes
and
Investopedia
, and has been featured in
Investor's Business Daily
, in
Consumer's Digest
and on
MSNBC.com
.