Technical Setups: Telesp, La-Z-Boy

With the potential for that added volatility coming full swing as we approach a whole new month, it's time to take a look at three new stocks that could be posing attractive technical setups right now.
By Jonas Elmerraji ,

BALTIMORE (Stockpickr) -- It may seem hard to believe, but the first trading day of December is upon us -- and 2011 stands just a month away. At present, major stock indices, such as the S&P 500, sit prepared to end the year with mid-single-digit gains, a far cry from the 20%+ returns the market provided as a response to 2008's selloff.

Still, as I've mentioned for the last couple of weeks, the potential for a year-end rally exists right now if bullish investors can wrangle control of this fickle market. As has seemingly been the case all too often this year, the S&P sits at a key level right now, with support at the 50-day moving average immediately below yesterday's closing range. We'll want to see a bounce off of that support level to get a pop above 1200.

>>Also:

10 Best-Performing S&P 500 Stocks

With the potential for that added volatility coming full swing as we approach a whole new month, it's time to take a look at three new stocks that could be posing attractive technical setups right now.

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.

>>Also:

3 Stocks Setting Up to Break Out

Here's a look at

this week's potential trades

.

First up this week is

Telecomunicacoes de Sao Paulo

( TSP), a Brazilian telecom stock that's better known to the non-Portuguese speakers on Wall Street as "Telesp."

On the whole, this year has been a relatively poor performer for Telesp shareholders, with shares down around 5% since January. But traders should be taking note of the 22% rally that shares have enjoyed in the last six months for further gains.

>>Also:

5 Brazilian Stocks to Watch in 2011

One of the key principles to technical analysis is trend -- and in the case of Telesp, there's been a clear uptrend in play for the last two quarters. More importantly, that uptrending price action has been bounded by a price channel over that period. That price channel defines our downside risk (the point below which the pattern breaks down, and we'd want to put a stop loss) as well as our upside gain potential (the upper line) now that shares of Telesp are sitting right at support.

Now's a fairly strong time to consider going long shares of Telesp. The last two times shares of this company have hit support, they've bounced up to trend line resistance. That gives us double-digit upside potential if a third bounce occurs. Place your protective stop around $23 if you decide to take this play.

>>Also:

5 Stocks With Emerging-Markets Upside

Furniture retailer

La-Z-Boy

(LZB) - Get Report

has been playing a different sort of game this year.

The last six months have sent shares of this furniture manufacturer sliding more than 35% -- a substantial drop predicated on poor performance in the higher-end furniture business. Now, though, with a double-bottom in La-Z-Boy's price action, this firm could see higher ground.

>>Also:

15 Retail Takeover Rumors

Shares of La-Z-Boy hit a double-bottom back in September. Since then, they've made it a notch higher to another support level at $7.50. Now, with that new base in place, shares could have more upside potential ahead of them as they attempt the next resistance level at around $9.

The best chances of an upward burst in La-Z-Boy's share price are going to come in conjunction with a move higher for the broad market. If the S&P can manage to stage its own push upward, shares of La-Z-Boy should enjoy an amplified move. I'd suggest putting a stop below $7.50 to protect on the downside, and plan on a near-term exit around $9.

>>Also:

Top-Rated Leisure Goods Stocks

The for profit-education industry has been under siege at the hands of new financial aid litigation aimed to curb unsavory practices going on at these firms. As a result, stocks like

Corinthian Colleges

(COCO)

have been pummeled in the latter half of 2010.

The action may not yet be over. Shorts take note: Shares could be headed even lower before 2011.

While the chart above looks similar to the bullish chart of La-Z-Boy from before, there are a couple of very important differences. The first is the fact that COCO is continuing to see lower highs. Every time bulls attempt to bid shares of this stock back up, they fail to make it as far as their predecessors, which suggests that bullish investors are capitulating under the selling pressures of shorts. As a result, shares are approaching $4 support once more, and forming a bearish pattern known as the descending triangle.

>>Also:

3 Earnings Short-Squeeze Stocks

Essentially, as prices bounce between overhead resistance and the support level below, they're continually getting squeezed closer and closer to breaking below that $4 support level. If they do, many of this stock's remaining buyers will be shaken out. That said, the smart money won't be betting against this stock until a confirmed breakdown occurs.

Wait for a push below $4 before making a short-side bet. Right now, it looks likely that we'll see another bounce to resistance before that happens.

>>Also:

10 Worst-Performing S&P 500 Stocks

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:

>>4 Stocks ESL Investments Is Betting On

>>Top 23 Stocks Based on PEG, Price Momentum

>>20 Stocks With Huge Insider Selling

Follow Stockpickr on

Twitter

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.

Loading ...