BALTIMORE (Stockpickr) -- When the biggest financial names move, investors follow. But to get a shot at the biggest gains from the biggest stocks, following is rarely enough -- you need to anticipate where stocks are going to move before they actually do. That's where technical analysis comes in.
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 week, Stockpickr analyzes the technicals for some of Wall Street's highest-volume stocks and takes a look at how to trade them. Here's
at how some of the biggest names on Wall Street are trading technically.
Things don't bode well for
this week. The offshore driller disappointed with earnings yesterday, sending shares to their lowest levels in three months. With the breach of a major technical trend line, it looks like Transocean could be trading lower still by Friday's close.
Fundamentally, things were looking good for Transocean. The company remains one of the best-positioned drillers in the industry, with a $30 billion backlog, an unmatched fleet of drill ships and economic tailwinds all offering to make things easy on shareholders. And in the last year, the company managed to make the most of those factors as share prices jumped more than 34% amid economic recovery and a strengthening oil market.
But Wednesday's earnings miss send shares below uptrending support and the 200-day moving average, two price levels that provided a sort of "floor" for shares. That colossal breakdown through support essentially leaves shares open to significant downside risk. With the next semblance of a support level down at $74, a downside play could be lucrative for investors willing to bet against what's still a fundamentally good play.
Sirius XM Radio
announced its fourth-quarter 2009 earnings this morning before the market open, delivering solid numbers that should catalyze a strong upside move in the stock -- particularly given how much traders like playing shares of this company.
Sirius XM has been plagued by significant financial trouble in the past, scaring many investors away and frustrating those who remained. But the company's fourth quarter provides a glimmer of hope right now: The highly leveraged company managed to turn a profit in its fourth quarter, a sign that better times could lie ahead for this stock.
Shares of Sirius XM have been rallying hard in 2010, rocketing 83% year to date. But that could just be the beginning with a pennant continuation pattern formed in the stock right now. The pennant suggests that shares will likely continue to move in the direction they'd been going -- in this case up. Earnings today should be enough of a catalyst to springboard shares higher in today's trading.
2010 has been a different story for London-based banking giant
-- shares have slipped 3.3% so far this year. But that too could be due for a change if the company can make it past an important resistance level this week.
Yesterday, shares of HSBC closed right under the stock's 50-day average, an important level for shares that could prove to be a big hurdle for shares. But a break over that level makes for an unhindered jump to significantly higher ground -- most likely the $60 level.
Traders have already managed to avoid the downside toll of a bearish head and shoulders pattern that formed in the stock back in the last quarter of 2009, a fact that suggests bullish sentiment is in play. Now it's a matter of seeing if there's enough of that sentiment left to make it over the 50-day.
Don't think about going long shares of HSBC until a close above the thin blue 50-day moving average line.
To see this week's trades in action, check out the
-- Written by Jonas Elmerraji in Baltimore.
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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
, and has been featured in
Investor's Business Daily