Must-See Charts: JPMorgan, Philip Morris

Here's a look at how to trade some of Wall Street's highest-volume stocks, including JPMorgan and Philip Morris.
Author:
Publish date:

BALTIMORE (Stockpickr) -- Federal Reserve Chairman Ben Bernanke's testimony to Congress after the market's close yesterday should have some impact on stock trading today. During his comments, the chairman took on the issue of Chinese yuan devaluation, which Treasury Secretary Tim Geithner took flak for postponing earlier this month in favor of more diplomatic avenues.

Government officials accuse the Chinese of artificially holding down the value of their currency, a move that incentivizes manufacturing in the world's biggest exporter nation. As a result, the economic implications could be big if Washington takes a firm line with Beijing. They could significantly increase domestic manufacturing in the next decade. More likely, though, actions against China will be unenforceable thanks to political pressures.

While economic speculation is great for keeping on top of developing trends, it'll do little to fuel our portfolios in the short term. For that, we need 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.

Every Thursday, Stockpickr analyzes the technicals for some of Wall Street's highest-volume stocks and takes a look at how to trade them. Here's

this week's look

at how some of the biggest names on Wall Street are trading technically.

Tobacco giant

Philip Morris International

(PM) - Get Report

has done a good job of keeping its performance in pace with the broad market in 2010, thanks to its persistent place as the world's No. 2 cigarette manufacturer. But the stock could be in for a downward move due to a breakdown below support.

Despite sin stocks' reputations as bear-beaters during tough market conditions, Philip Morris has been forging an uphill battle in the past couple of years at the hands of increasing regulation and a shift toward cheaper, lower-margin cigarette offerings. Still, the company has managed to deliver solid returns and a very impressive dividend yield to its investors thanks to company fundamentals that were already strong when it spun off in 2008.

>> Who Owns Philip Morris?: Renaissance Technologies

That dividend yield could be increasing in the near-term, thanks to a falling share price. The company's stock price broke down below support yesterday, a move that suggests it will make its way to the 50-day moving average. For a high-probability play, wait for an open below the "Resistance 1" line before betting against shares.

Latin American banking stock

Popular

(BPOP) - Get Report

has certainly been living up to its name for the past couple of days. More than 214 million shares of the stock traded on the

Nasdaq

yesterday alone. That huge spike in volume -- and share price -- is the result of a new preferred stock offering that was designed to raise $900 million in capital. So is there a trade in this stock right now?

The biggest issue with Popular right now is the fact that shares rallied hard despite two normally negative news items: a dilutive earnings offering (the premium shares are convertible to common) and poor earnings numbers. But that didn't stop traders from betting up the stock intraday, leaving it overextended and without any discernable pattern.

>> Who Owns BPOP?: Third Point

That doesn't mean shares won't make an upward move today, only that the timeframe worth focusing on is a bit too tight for our purposes. If you want an interesting lesson in day trading, keep your eyes on BPOP's intraday price action. Otherwise steer clear of this overbought stock for now.

Big-three banking company

JPMorgan Chase

(JPM) - Get Report

has been slowly eking its way toward the best-in-breed title for the banking industry. Thanks to management troubles at

Bank of America

(BAC) - Get Report

and balance sheet instability at

Citigroup

(C) - Get Report

, JPMorgan hasn't had it too hard from a fundamental perspective. And right now, this $190 billion money machine makes for a strong technical play too.

JPMorgan announced its

first-quarter earnings

yesterday, impressing Wall Street with earnings of $3.3 billion, or 74 cents per share. The company was relatively conservative in its earnings call, remarking about additional credit loss risks, but clearly that didn't scare analysts and investors away from shares of the stock.

>> Who Owns JPMorgan?: Lone Pine Capital

What's significant technically is the fact that shares opened above resistance yesterday, pushing to a 52-week high. That leaves considerable upside potential for JPMorgan right now. Wait for a second consecutive close above resistance before going long -- and be ready to wait for consolidation before seeing a material move to the upside.

To see this week's trades in action, check out the

High Volume Technicals portfolio

on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

RELATED LINKS:

>>"Fast Money" Portfolios of the Week

>>Debt-Free Short-Squeeze Opportunities

>>Technical Analysis Forum

Follow Stockpickr on

Twitter

and become a fan on

Facebook.

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.