Technical Setups: Nucor, Petrobras, Rite Aid
BALTIMORE (Stockpickr) -- We'd hoped for a December rally last week, and we ultimately got it. All told, the S&P 500 moved as was expected during the last five trading days, gaining nearly 3% as it bounced off of longstanding support.
But now that our move has played out so far
, some traders are left wondering what this year still has in store for us. The potential for
is becoming more and more possible as the markets consolidate short of resistance and bleed off overbought momentum, but buyers shouldn't ignore the risks of another bounce back down to support in the short term.
In broad terms, I'd recommend waiting for confirmation in either direction before making a mid-term move. As a trader, your goal is to react to market cues, not to anticipate hypotheticals.
Despite lingering uncertainties in the major indices, there are still trades to be had in the mean time as a few stocks present us with attractive technical setups.
Remember, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's chart patterns and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.
Here's a look at
.
Nucor
(NUE) - Get Report
Steel manufacturer Nucor has been struggling to keep its head above water in 2010 as volatile commodity prices have impacted both the company's input costs and revenue. All told, shares are down 11% this year, vs. nearly 10%
year-to-date. But Nucor could be on track to close some of that gap by the new year.
For the last several months, Nucor has faced staunch resistance right around the $40 level. Shares of the stock have attempted to break above that level no fewer than five times since July, with no success. But that all changed yesterday thanks to an
that had the stock closing at $41.33.
Now, with that overhead barrier removed, shares of Nucor are free to attempt higher levels. The next relevant resistance is right above $42, giving the company mid-single-digit
this month.
That said, wait for confirmation in today's trading before opting to go long shares. If you do decide to play this stock, place your mental stop just below $40.
Petrobras
(PBR) - Get Report
The paring of Nucor's share price doesn't hold a candle to the drop that shares of Petrobras have taken in 2010. The $150 billion Brazilian integrated energy company has seen its valuation drop by nearly 30% year-to-date -- and it could continue to drop as shares approach resistance right now.
Petrobras is currently closing in on trend line resistance at $36, a level that the stock has failed to move above for the last four consecutive attempts. To the downside is support at $32, a level that has successfully halted the stock's drop each of those times. That's a wide range that shares are consistently moving between -- and one that traders should be taking advantage of right now.
I'd suggest waiting for shares to attempt trend line resistance for a fifth time before betting against shares of Petrobras.
Don't give too much credence to the 50-day moving average, which currently sits at $34.35. While this study typically acts as a key level, shares have ignored it thus far, and PBR shouldn't have a problem cutting through that level. I'd suggest placing a protective stop just above $36.
Rite Aid
(RAD) - Get Report
Don't be fooled by the number of its stores you see across the country; Rite Aid is deep in
these days. A descending triangle forming in shares could mean that this pharmacy chain is headed lower still.
Rite Aid has been trading below $1 since late September, a telling sign of market sentiment for the stock. That $1 price is a significant psychological level for the market, and as a result it's currently a resistance level that shares will likely have difficulty moving above.
But an upside price barrier is only part of the story. With shares of this stock starting to form a bearish descending triangle pattern, the potential for a breakdown below support is real.
Don't bet against shares until the breakdown below 86-cent support gets confirmed. Because of Rite Aid's proximity to the $1 mark, this could be a volatile trade right now.
To see these plays in action, check out the
Technical Setups for the Week portfolio
on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
RELATED LINKS:
>>Is This Gold and Silver Breakout the Real Deal?
>>3 Buffett Stocks Yielding More than 3%
>>11 High-Yield Dividend Champions With Staying Power
Follow Stockpickr on
and become a fan on
Facebook.
At the time of publication, author had no positions in stocks mentioned.
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.