By Roberto Pedone
WINDERMERE, Fla. (
) -- Technical analysis is a great tool that investors and traders can use to try to even the playing field on Wall Street. Instead of blindly throwing money at a stock, market players can consult the charts and try to determine things such as prevailing trends, where support and resistance are and what levels on a stock mark a good entry or exit point. They can also analyze trading volume to see if the big money is moving into a stock or moving out.
All investors hope to end up on the right side of the trend, and using technical analysis to stalk the charts like a forensic scientist can help them remove emotional bias and make informed decisions. For instance, noticing that a stock is trending down might help an investor avoid an investment based on his or her love of the company's product.
By no means should we ignore the fundementals, but at the end of the day, the objective is to make money. Technical anlaysis can help us make money on the long or short side by discovering the best chart patterns that give us the highest probability of success.
Here's a look at
that are piquing the interest of the Stockpickr community. If you're interested in having a chart analyzed for a future article, please
submitted Greece-based telecommunications company
, a stock that has been sold off heavily due to the
. What's intersting here is that Hellenic Telecom was actually trending lower before the Greek crisis became mainstream news.
Looking at the chart, you can see that Hellenic Telecom has been in a well-defined downtrend since early last year after the stock reached nearly $10 a share. Shares of Hellenic Telecom are now trading below both the 50-day and 200-day moving averges, which is often not a great sign for future upside price action. However, the stock is now trading into the $5 level, which in the past provided some support for the stock. Also worth noting is that Hellenic Telecom has seen some above-average volume come into the stock as it has traded down toward $5.
Bottom line: If the bulls are truly snapping up this stock, you could see some sideways action happen here near this $5 support level, but if the stock breaks that support, it's heading much lower.
submitted Canada-based gold producer
. Yesterday, I discussed my
Let me start off by saying that I like the chart for Yamana very much. The stock has been trading in a tight range-bound channel since February between $11 a share and $9.60 on the low end.
Just yesterday, Yamana broke above the upper end of the channel on twice the average daily volume. Sideways price action, followed by a breakout above previous resistance, usually is a pattern that sets up for much higher prices. At the minimum, this stock could well be on its way toward $13 a share, if not even higher.
It's worth noting that gold has broken out to all-time highs, and it's important to remember that most of a stock's move comes from the underlying move in whatever sector it is a part of. The trend in gold right now is up, and it looks like the trend in Yamana is on its way up as well.
Another submission from Michael Morse was
Cooper Tire & Rubber
, a manufacturer of replacement tires. The chart for Cooper Tire looks great. Take a look, and you will see a clearly defined uptrend channel that shows a pattern of higher highs and lower lows.
As a technician, I look for stocks making higher highs and higher lows as a sign of strong demand. Basically, think about it like this: If a stock is making higher lows, that means every time the stock pulls back, investors aren't waiting long before jumping in to snap up shares. A higher high is just a great way to confirm that strong uptrend is intact.
Also, notice how Cooper Tire found support at the 50-day moving after a quick pullback. The company just declared its 153rd consecutive quarterly dividend, so the fundaments seem to be trending right in line with the stock.
Wayside Technology Group
, a marketer of software targeting software development and information technology professionals within enterprise organizations.
Looking at the chart for Wayside, you will see another bullish uptrending pattern that clearly displays a stock making higher highs and higher lows. There was once instance where Wayside made a lower low and the stock broke through the 200-day moving average. However, whatever caused that sharp selloff back in April didn't stick, and the stock quickly resumed its uptrend.
I pulled up a longer-term chart to see where the next areas of resistance is on this name, and it looks like at around $11 is the next significant level. This stock doesn't trade a lot of shares, with the average daily volume clocking in at around 7,000 shares. Recently the stock has experienced some above-average volume, which could indicate that institutional investors are raising their positions. It's also worth noting that Wayside has a dividend yield of 6%.
If the report is a good one, I would look for the uptrend in Wayside to continue.
The last stock I will analyze is another submission from shawnmks:
PowerShares DB Agriculture Fund
. The DBA is an ETF designed to benefit off the rise in futures contracts on some of the most liquid and widely traded agriculture commodities. Looking at the chart, you can see that the DBA formed a double top at around $42 a share back in 2008. Since that top, the stock did nothing but trend lower before finding a temporary bottom and support around the low-$20s.
The DBA has been bouncing back and forth between roughly $29 and $22 a share since 2009. The problem I see with this ETF is that it has recently formed a downtrend channel and is trading below both the 50-day and 200-day moving averages. Within that recent channel, the stock has been making lower lows and now looks ready to test the lower ends of its previous support. This could take the stock all the way down to $21 or possibly even lower.
Bottom line: This stock is clearly not in an uptrend, and the sideways pattern looks to be breaking toward testing the downside and not toward breaking out of the range and discovering higher prices.
To see some more technical analysis on stocks such as
Goldman Sachs Group
, check out the
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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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