By Roberto Pedone
WINDERMERE, Fla. (
can be a great asset to investors who want to determine what the trend of the market or a stock is before they throw down hard-earned money. Consulting the charts can help you spot important market action before it happens, preparing you to follow the trend and make the right trade.
Technical analysis is a method of evaluating securities by relying on the assumption that market data, such as charts of price and volume, can help to predict future market moves and trends. Technical analysis will help guide you to discovering the chart patterns that offer the highest probability of success. Combining technical analysis with fundamental analysis, can give you a significant edge over the majority of market participants.
Dow Jones Industrial Average
has dropped below the 200-day moving average of 10,436.20 on heavy volume. Investors are now going to want to watch the Dow to see if it can hold the next area of significant support at the 50-day moving average of 10,264.66. A move below that level will almost certainly lead to lower equity prices.
has already lost the 200-day moving average and is now closing in on the very important 50-day moving average of 1088.04. I can't stress how important it is going to be for the S&P to not plunge below this key technical level. If the S&P loses the 50-day, it could setup a move toward the next area of previous support at 1056.88.
With this in mind, here's a look at
that are piquing the interest of the Stockpickr community.
Stockpickr member snackdawg also submitted
, a diversified financial services company and a registered bank holding company. Snackdawg indicated he likes this stock from the short side, and I can't say I disagree.
Looking at the chart, you can see that Synovus is displaying the exact type of chart pattern you would want to see if you're shorting a stock. Shares have been making lower highs since May and selling off sharply every time the stock has found any buying support. This demonstrates that every time the stock moved higher, market players were eager to sell their positions and get out of the stock on any strength.
Besides the higher lows, the stock has also been making lower lows since May. This stock is clearly in a downtrend and displaying a very bearish technical patterns and price action. If you're short this stock, I would watch for a break below some previous support at $2.27 for confirmation of the next leg down.
More on Synovus
10 Bank Stocks Trading Under $5
The next chartcomes from Stockpickr member xxfranky1769xx who submitted
. This company is engaged in the manufacture and sale of chemicals, plastic materials, agricultural and services, and other specialized products and services. On Aug. 3, Dow reported a lower-than-expected quarterly profit that pushed the stock down 10% on the news.
If you take a look at the chart for Dow, you can see that prior to the earnings report, the stock traded above some previous resistance at around $28 to $27 a share. This move also took the stock back above the 200-day moving average, which it had been struggling with for some time. Unfortunately, this move looks to have been a false breakout.
Shares of Dow were hit with heavy selling following the stock's breakout move, which took the shares up towards $28.50. The volume on two down days following the breakout eclipsed 42 million shares and 27 million shares compared with the three-month average daily volume of 12.9 million.
Now shares of Dow are trading below both the 50-day and 200-day moving averages, which is a bearish indicator. The stock also seems to be stuck in a range bound trading channel from $28 to $22 a share. It now looks highly probable that the stock is going to test the lower end of support at around $22.50, especially if it fails to hold $24.50.
If you're looking to buy this stock, I would wait for it to fall to a level that the bulls are willing to defend. Maybe at $22.50 you will see this happen.
Stockpickr member kjp712 submitted
, a company that designs, engineers, manufactures and markets snowmobiles and all-terrain vehicles (ATVs).
This stock had been in a downtrend since May, which took shares from $16 all the way down to $8. The stock formed a double bottom pattern at $8 and has since rebounded and broken above the downtrend line.
Since that double bottom, the stock has run into some resistance at around $10.50 a share. If Arctic Cat drops below the 50-day and 200-day moving averages, which it looks likely to do, the stock should then trade down back towards previous support at $8. A move toward that level could setup a good buying opportunity as long as the stock doesn't fall below $8. However, if it can't hold $8, then the stock could fall back into a downtrend and head much lower.
Stockpickr member snackdawg submitted
, a manufacturer of differentiated organic chemical products and of inorganic chemical products.
Recently, shares of Huntsman started to breakout above some previous resistance at around $10.68 a share on strong volume, but that breakout looks to be a false move.
Now Huntsman is starting to trend back below a key uptrend line that was acting as support since the stock formed a near term bottom at $8.20 a share. If this stock fails to hold the 50-day moving average of $9.51, then it could set up the shares for a move back toward some previous support at $8.90 and $8.20 a share. If you're bullish on this stock, you might want to wait for the stock to prove it has support at either of those levels before jumping in on the long side.
To see some more technical analysis on stocks such as
(HPQ), check out the
portfolio on Stockpickr.
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At the time of publication, author had no positions in stocks mentioned.
Roberto Pedone, based out of Windermere, Fla., is an independent trader who focuses on stocks, options, futures, commodities and currencies. He is also an outside contributor to Beconequity.com and maintains the website Maddmoney.net, which he sold to Blue Wave Advisors in 2008. Roberto studied International Business at The Milwaukee School of Engineering, and he spent a year overseas studying business in Lubeck, Germany.
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