BALTIMORE (Stockpickr) -- A hawkish Fed move yesterday has the markets pointed toward lower opens this morning as investors try to make sense of the change. A half-hour after Thursday's close, the Federal Reserve raised the rate it charges banks by a quarter of a percentage point to 0.75%. And although the Fed stressed the fact that the change shouldn't have any palpable impact on monetary policy, the timing of the increase is what has investors flustered.
With economic sentiment numbers sliding following a lackluster start for stocks in 2010 and economic fundamentals that fail to meet analyst expectations, many were taken aback by the thought that the Fed was ready to start increasing rates again.
But whichever way this move drives the market, we'll be in line to benefit. How? Once, again, we're turning to the technicals.
Every week, Stockpickr analyzes the technicals for some of Wall Street's highest-volume stocks and takes a look at how to trade them using technical analysis, which 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.
With that in mind, here's
at how some of the biggest names on Wall Street are trading technically.
It's been a good year for
. The company continues to enjoy its deep economic moat, thanks to its Windows brand of operating systems; its Bing search engine has been seeing striking successes; and shares are up nearly 52% in the last 12 months. But that rally could be coming to an end in the next month given the stock's technicals.
Microsoft had been trading above its 50-day moving average for some time -- until the stock hit a bearish double-top pattern back in mid-January and shares broke down below the 50-day shortly thereafter. Shares started to turn back up at the beginning of February, but two key resistance levels stand to challenge a movement much higher.
With the 50-day moving average currently at the $29.59 level and a very strong resistance line at just above $31, Microsoft will clearly need some sort of strong fundamental catalyst to break above those levels. Wait for a confirmed bounce off of one of those levels before making a downside trade.
is one of the most talked-about stocks right now. The company's well-publicized recalls have proven to be costly and embarrassing -- something no one in the beleaguered auto industry could have been prepared for. That said, Toyota shareholders shouldn't unload their stakes just yet, because this issue could be due for a bounce.
Shares of Toyota already staged a bounce in the first week of February, and another bounce off of the horizontal blue line gives the stock a double-bottom pattern, which is a bullish signal to traders that suggests shares are headed higher. And with all of the eyes on this stock right now, it's likely to be a signal that gets picked up in a big way.
That's not to say that it's a sure trade at this point. Toyota is a company that's being driven by fundamentals right now. News of additional potential recalls and their resultant liabilities are going to determine whether or not we'll see a bounce. Not that that matters too much for our purposes -- after all, we only make trades once they're confirmed. To that end, don't even think about longing this stock until a confirmed bounce off of the blue line.
If the market does lead stocks lower in the next week,
might just be the way to play it. While there's no question that Dell has been a top performer in the past, with the company's slim economic moat and the unraveling economics of the PC market right now, 2010 may prove to be a challenging year for the Austin, Texas-based computer giant.
Last week, shares broke above the 200-day and 50-day moving averages, which is a bullish signal, considering the fact that those levels were acting as resistance. But that upside excitement may be short-lived with a much more foreboding resistance level just overhead.
Dell hasn't really been obedient to the moving averages this year. In fact, in the past, it's cut through them like a hot knife through butter. It's no surprise then that last week's "breakout" was really just more of the same. It's that blue downtrending resistance line that you'll want to keep your eye on instead; the line has acted as a price ceiling for the stock three times in the last six months.
To see this week's trades 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.