BALTIMORE (Stockpickr) -- While bond markets may have been closed yesterday for the Columbus Day holiday, there was little question that equity traders were out to open the trading week on Monday. For the most part, trading was in line with expectations on the NYSE and Nasdaq as investors held the indexes predominantly flat for most of the trading session. That has the potential to change later in the week as the effects of earnings season and economic data get digested by market participants.
This week, consumer confidence data, commodity inventories and manufacturing data hit center stage along with quarterly releases from the likes of
. Added trading volume could help spur a technical breakout in the coming days.
That's why we're focusing on three more technical setups this week to wring maximum upside out of the market.
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
is one of those companies whose business isn't easy to describe. A diversified holding company, Loews operates subsidiaries with interests in everything from insurance to offshore drilling to hotels. But what has been relatively easy to explain is the respectable return shareholders have enjoyed so far this year -- a nearly 7% gain that's come at the hands of consistently stronger financial performance. Now, with a potentially bullish technical pattern forming in shares, investors could find themselves sitting on an even more attractive play.
Right now, shares of Loews are forming an inverse head-and-shoulders pattern, a bullish technical setup that suggests shares could be headed higher in the near term. The inverse head and shoulders is characterized by three bottoms, the middle of which (the head) is lower than those on either side (the shoulders). On top is a relatively set resistance level, known as shoulder level. Once shares break above shoulder level, our buy signal gets triggered.
>>Who Owns Loews?:
Unlike other technical setups, I'm not a huge fan of head-and-shoulders patterns because they're easily misconstrued and frequently fail to execute. That said, when they do come to fruition, they tend to be a powerful pattern. That's why it's so essential to keep an eye on Loews right now as shares bump their head on shoulder level at $39. Watch for a sustained break above that level.
( FO) has provided its investors with strong upside performance this year; it's just been of a different magnitude. Shares of Fortune Brands are up more than 28% since the first trading day of January. The stock's most recent price action suggests that it's only the beginning.
Fortune Brands jumped earlier this month following news that hedge fund manager
directed his fund to take a large position in the holding company, which owns brands such as Moen faucets and Jim Beam bourbon. Shares broke out above a longstanding resistance level at $54 before starting to settle in a consolidation channel.
With shares of Fortune Brands approaching overbought territory, this stock will need to bleed off momentum and form a base before shares can move higher. Buy on a break above $57.
A similarly attractive technical setup is forming in shares of
, a $2.6 billion New York-based insurance firm that owns subsidiaries throughout the U.S.
While Loews' head-and-shoulders pattern is one of the less-reliable technical setups, Alleghany's ascending triangle pattern is one of the most reliable -- and one of my favorites. The ascending triangle can be spotted as a staunch resistance level overhead met with higher lows. As shares bounce higher off of that lower support level, they get squeezed toward resistance for hopes of a breakout.
In this case, that breakout happens on a sustained move above $305. If you decide to take the trade, place a protective stop just below that level to avoid having the play turn against you.To see these plays in action, check out the
-- Written by Jonas Elmerraji in Baltimore.
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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.