BALTIMORE (Stockpickr) -- Last week proved a fact that most technical analysts are loath to admit: Even the best technical setups can be scuttled by unfavorable fundamentals. Indeed, that's exactly what we experienced in the last few trading days as poor bank performance yielded a colossal selloff in stocks that actually broke down through support at the S&P 500's 50-day moving average.
All told, none of last week's potential long-side setups actually triggered, as the patterns that looked most promising missed their marks thanks to three consecutive losing days in the S&P.
With strictly defined trade triggers in place, though, we'll live to trade -- and profit -- another day. Maybe even today, so once again, we're taking a look at the week's
Technical analysis is a way for investors to quantify qualitative factors such as investor psychology based on a stock's chart patterns and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.
But all too often, investors don't know where to start. So every week, Stockpickr takes a look at stocks that could be staging a technical move soon and compiles a portfolio of promising
Here's a look at this week's stocks.
This week, one of the most prevalent bullish patterns we're seeing is the bounce off support that many stocks are staging thanks to last week's pullback. New York-based conglomerate
is one of the stocks that are staging a bullish bounce.
Leucadia traded right down to its 50-day moving average (the thin blue line in the chart above) in Friday's trading session and bounced off to open higher to start this week. The caveat with this stock is the staunch resistance level right around $26. With a breakout above that level unlikely, right now, that level becomes our price target.
Consider going long following a second consecutive positive open. $14 billion steel producer
has investors' attention this week thanks to fourth-quarter 2009 earnings released before today's market open.
While the company recorded losses in the first three quarters of last year, forecasts for a break-even or slightly profitable fourth quarter sent the stock higher at Monday's close.
So, how does that spawn a trade? Well, Nucor has been subject to the same pattern as Leucadia over the course of the last few six months: strong resistance around the $51 level, and a bounce off of the 50-day moving average. Nucor has an added bullish advantage in that its 50-day moving average crossed over its 200-day moving average within the last few bars. As a result, seeing prices in the low $50s isn't out of the question in the next two weeks.
As with Leucadia, however, the buy signal doesn't trigger until a second consecutive positive open.
Automotive supply retailer
is forming some bullish technicals right now, but not in the same patterns as the preceding plays.
Shares of the company made some headway in 2009 as aging cars and tightened credit sent consumers to auto part stores instead of showrooms. And with the largest store network in its industry, AutoZone should continue to shine in 2010.
In the fourth quarter of 2009, AutoZone shares formed an inverted head-and-shoulders pattern, a bullish pattern that suggests shares are set for a rally -- and sure enough, they rallied. The company's stock made it all the way up to the $169 level, slightly above the pattern's price target of $160.
Now AutoZone is doing it again, thanks to an ascending triangle that's been forming since the beginning of the year. This stock rings the buy signal on any close above the horizontal blue line.
To see these plays 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.