Must-See Charts: Rio Tinto, DirecTV, Qualcomm
BALTIMORE (Stockpickr) -- As expected, volatility is back on the rise this week as investors digest a bevy of fundamental data. Yesterday alone, broad-based indices gained nearly 2% as market participants bid up equities in the first trading day following the Fed's much-awaited QE2 announcement.
On Wednesday, Fed Chief Ben Bernanke announced that the nation's central bank would be spending $600 billion on longer-term bonds in the next year in efforts to increase the money supply and stimulate economic growth. While opinions on the effectiveness of such quantitative easing continue to be mixed -- and heated -- the market is reacting positively on hopes that the benefits of the economy's added cash will offset the downsides.
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Meanwhile, a number of companies are reporting their quarterly earnings this week - many of which have been on the upswing. That's spurring a much-needed sentiment shift at a critical time; yesterday's crack above the 200-week moving average for the
S&P
means that stocks could have further room to run provided we see some sideways action for the next few weeks.
Many of those reporting stocks are showing interesting technical charts right now -- and with the sheer volume of shares trading hands this week, they're worth watching. 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.
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Here's this week's look at how
some of the biggest names on Wall Street
are trading technically following this week's earnings numbers.
British-Australian mining giant
Rio Tinto
(RIO) - Get Report
saw a big breakout yesterday, closing 5.6% higher by the end of Thursday's trading.
The move comes after a strong run for RIO, one that's already shown investors 31% gains so far this year. Now, with yesterday's market action under our belt, we could be primed for higher ground.
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For the last few weeks, Rio Tinto has been forming a bullish ascending triangle pattern. Essentially, this breakout pattern is characterized by a staunch resistance level and higher lows. As shares of a stock get squeezed in between these two levels, they get closer and closer to breaking out above that resistance level -- which is exactly what Rio Tinto did yesterday.
The breakout was magnified by the bullish market action already underway for equities in yesterday's trading session. As such, it'll be important to monitor today's direction to ensure that this stock doesn't give back those gains. Look for confirmation above the $67.50 resistance level before going long.
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Action was somewhat less bullish yesterday for
DirecTV
(DTV)
, despite the fact that the company met earnings expectations, and grew revenue and subscribers in the third quarter.
Shares of the satellite television firm ended 3.6% lower yesterday. That said, downside risk looks fairly minimal right now, and shareholders willing to hold out for another buying opportunity could be rewarded.
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It's important to note that the majority of today's hard move down came early in trading, a direct response to the firm's earnings announcement. Because of that, most of DirecTV's move lower came on a smaller chunk of volume. the rest of the day, traders jumped onboard but didn't impact the magnitude of the move. That suggests this isn't a conviction sell, just a gut reaction.
Because DirecTV shares formed a base at $41.50 back in September (a level that happens to coincide with the 50-day moving average right now), that seems like a logical place for shares to find support. Consider being a buyer on a bounce off of that level.
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Another high-profile breakout yesterday came from
Qualcomm
(QCOM) - Get Report
, the communications technology firm that jumped 5.8% yesterday on good earnings surprise.
That gap up essentially resets this stock's support level, giving the company an opportunity to build a base at higher levels.
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That's significant given the fact that Qualcomm had been seeing some difficulty in breaking above the $46 resistance level. As with Rio Tinto above, we'll want to see confirmation in today's trading before this stock becomes a worthwhile upside trade.
To see this week's trades in action, check out the
High Volume Technicals portfolio
on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
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At the time of publication, author had no positions in stocks mentioned. Jonas Elmerraji, based out of Baltimore, 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.
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
.
