By Roberto PedoneWINDERMERE, Fla. (Stockpickr) -- Technical analysis 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 trends. Technical analysis will help guide you to discovering the chart patterns that offer the highest probability of success. For instance, if the market is on the verge of a major move, you'll be prepared to participate in that move, whether it's up or down.
Market players who use technical analysis are watching the
very closely right now because the major average is trading right around its 200-day moving average of 1114.12. If the S&P 500 can manage to trade above the 200-day and then get above some near-term resistance at around 1131.23, it could then set up to test 1173.57. However, a failure to trade above the 200-day moving average could set up a very sharp move lower.
Here's a look at
that are piquing the interest of the Stockpickr community.
Stockpickr member shawnmks submitted
, a company principally engaged in the design, manufacture and sale of firearms to domestic customers. Recently, the stock was able to find some support at around $13.35 a share, and now shares are trading back above the 50-day moving average. It's worth noting that Sturm Ruger has recently been making some higher lows, which shows that investors are snapping up the shares on any pullback.
But there is one major issue: The stock double-topped back in May at around $17.80 a share and then dropped sharply. That double top is now going to be overhead resistance until it is taken out on the upside. If this stock can manage to get back above $17.80, then it could setup for a run back toward the next area of resistance, in the mid-$20s.
Keep in mind that Sturm Ruger is set to report earnings on Thursday, so the report will be the catalyst that either takes the stock back above overhead resistance or sets the stock up for a sharp move lower. If I were long this name, I would love to see the stock take out $17.80 ahead of the report. It's also worth noting that some decent up-day volume has started to come into this name during the month of July vs. the down-day volume.
Stockpickr member empiremaker submitted
, which operates the retail electronic network and manages a global payments brand. This stock has been trading in pretty much a sideways pattern for the past couple of months, between $70 on the low end and $83 on the high end. The stock has found solid support three times at the $70 level, so a break below that price would be very concerning if you're a bull on this name.
Recently, shares of Visa have managed to trade above the 50-day moving average of $74.50, but the stock is now struggling to get above some near-term resistance at around $78. The company is due to report earnings today after the close of the market, which will definitely provide a catalyst for the stock one way or the other.
If you're a bull on this name, I would want to see the stock get above $78 today, which should set up a run back towards $82.31 (200-day moving average) if earnings are good. If you're a bear on this stock, you'll want to see the stock fail to break above $78 today, which should set up a move back towards $70 if Visa's earnings disappoint the Street. Remember, a move below $70 would be very bearish for Visa.
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The next chart comes from Stockpickr member kjp712, who submitted
ModusLink Global Solutions
. This company is engaged in worldwide supply chain business process management serving technology-based clients in the computing, software, consumer electronics, and storage and communications markets.
This stock has been stuck in a nasty downtrend for months now. This massive plunge lower has taken the stock from around $11 a share to current levels of $6.50. Now some bullish trends are starting to set up here for ModusLink. First, the stock has started to base and form a consolidation pattern that has, for now, stopped the stock's downtrend in its tracks.
Second, the stock is close to breaking above the 50-day moving average of $6.73. A move above that level would be a welcomed development for a stock that was acting as weak as ModusLink was. Third, the stock is starting to see some very bullish volume trends as the stock bases between the levels of $5.80 on the low end and $6.70 on the high end. Last Friday, the stock closed higher and saw 600,000 shares trade hands which is more than double the 3-month average of 241,000 shares.
If ModusLink can manage to trade above the 50-day it should setup for a big run back towards the 200-day moving average of $8.46, if not even higher.
There has been some
among the Stockpickr community, so I decided to throw this chart in for a bonus. Netflix is a subscription service streaming movies and television episodes over the Internet and sending digital versatile discs (DVDs) by mail to more than 12 million subscribers. Recently, the stock was hammered following its earnings report, which showed a 7.5% decline in average revenue per subscriber.
If you take a look at the chart, you'll see that the stock struggled to trade above $124 to $125 ahead of its July 22 earnings report. Also, the stock failed to trade back up toward some overhead resistance at around $128 ahead of the report. Subsequently, the stock plunged around 13% on heavy volume of 13 million vs. the three-month average daily volume of 3.5 million. The stock now trades at around $100 a share.
If you're looking to buy Netflix, I would wait for the stock to start consolidating and trading sideways before trying to catch this falling knife. The stock has literally no support at current levels, but there is some support down around $90 a share. Wait for the stock to trade closer to $90 and see if the bulls can come in and stabilize the fall. If the stock starts forming a basing pattern at those levels, then you'll know a bottom near-term could be in place.
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To see some more technical analysis on stocks like
Teva Pharmaceutical Industries
, check out the
portfolio on Stockpickr.
-- Written by Roberto Pedone in Winderemere, Fla.
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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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