BALTIMORE (Stockpickr) -- It's earnings season -- a time when market volatility typically increases on the heels of earnings reports. But just because a large-cap stock's quarterly numbers are uncertain doesn't mean that it can't be traded strategically right now. When the market becomes fundamentally unpredictable, it's time to turn to the technicals.
Technical analysis uses a stock's price movements to determine where shares are headed in the future. Technical charts are used every day by proprietary trading floors, the Street's biggest financial firms and individual investors to get an edge on the market. And according to some sources, skilled technical traders can bank gains as much as 90% of the time.
at how some of the biggest names on Wall Street are trading technically.
With a third quarter earnings release slated for Oct. 18,
is sure to be one of the most closely watched stocks next week. After all, this behemoth bank is one of the big four banking firms that serve as bellwethers for the financial services sector -- a sector that's been under increasing pressure to post fundamental improvements following the bailouts of 2008.
But investors' fears may be assuaged toward the end of this week. Citi is trying to mount a bullish move right now.
Citigroup has been a strong performer in 2010, rallying nearly 30% since the first trading day of the year. Now, as shares test an intermediate resistance level at $4.30, the stock could be on the verge of yet another breakout. Monday's earnings could be just the catalyst for that move
Until then, I think it's unlikely we'll see confirmation. That's because tepid traders will likely want to wait for fundamental backup before bidding up shares and risking their capital.
But the $4.30 resistance level is the less significant of Citi's challenges right now. More important is the firm's 52-week barrier at $5. Whether or not this bank can crack that level (which was attempted back in April) remains to be seen. Until then, consider going long on a second consecutive open above $4.30.'
>>Who Owns Citi?:
A financial firm in Japan is forming a markedly different pattern right now.
Mizuho Financial Group
has a long history of battling financial troubles. And although the bank has managed to stay afloat during that time, that resilience has come at the cost of outsized leverage and a lack of financial wherewithal. In the short-term, investors are likely to keep bidding shares lower.
Earlier this week, Mizuho's shares rallied up to resistance at the 200-day moving average, and proceeded to start crashing immediately after getting zapped by that upside barrier. Shares opened up considerably lower this morning, a sign that this firm's owners are sick of owning this volatile play.
Mizuho established a 52-week low of $2.67 earlier this month, and ultimately that range could be the place where shares finally settle. This stock is in falling knife mode right now - if you want to get into a short-side trade, Mizuho is a good bet.
is another stock that's getting shellacked in this market. Despite bullish momentum on Thursday, shares of this casino operator opened down nearly 9% on an analyst downgrade and news that the company was going through with a dilutive share offering. Just two minutes into trading, MGM was halted.
Now that trading's back open for business, where's this high-volume firm headed?
One key to the chart above was the level at which shares opened on Thursday. Because the stock opened below its closest support level at $12.50, it's likely that shares have further to fall. Most likely, we'll see shares tumble down to the 200-day moving average before finding any semblance of a price floor.
That said, as investors continue to digest the implications of MGM's latest corporate actions, bears could come out en masse against this stock. I'd recommend staying away from the long side of this trade for a while. If you decide to bet against shares, plan on a downside price target of $11.65.
To see this week's trades in action, check out the
portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
Follow Stockpickr on
and become a fan on
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.