BALTIMORE (Stockpickr) -- Yesterday's significant bearish action was a wakeup call for investors who've been sitting on the sidelines waiting for an opportunity to buy equities. Following disappointing economic data that showed the U.S. trading gap was widening, major indexes shed substantial points -- including the S&P 500's 2.82% intraday loss. This morning, the market looks equally volatile as investors attempt to digest jobless claims data.
But despite the market's machinations, there is some sense to be made of it thanks to the technicals.
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.
at how some of the biggest names on Wall Street are trading technically.
dominance as the pre-eminent electronic payment network showed no signs of slowing in its latest quarterly filing thanks to the growing use of debit cards in lieu of credit. But while the company's fundamental performance remains optimistic, a different story is brewing in its chart. Shares could be headed lower in the short-term.
Since the beginning of July, Visa has been finding a bottom around the $70 level. While a strong support level is normally considered a bullish signal (since it acts as a price floor that shares can't easily move lower than), lower highs in Visa's shares suggest something less appealing: a descending triangle pattern. A descending triangle is a bearish pattern that squeezes share prices against support, leading to a significant price breakdown. In my experience, it's one of the most dependable patterns out there.
So how should you play this trade? It's essential to remember that the fundamentals are fuelling this market right now, but with Visa's earnings date just two weeks ago shareholders can expect a data drought. With that in mind, I'd recommend betting against shares if and only if prices break down below the horizontal blue line. Set your stop loss at the upper slanted blue line.
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It's been a difficult couple of months for entertainment giant
Walt Disney Company
. Shares of the firm have been fluctuating wildly since the beginning of May, when an uptrend was broken and shares plummeted past support. Now, though, Disney's investors could find themselves on the verge of an upside play.
Disney started forming a bullish inverse head-and-shoulders pattern back at the beginning of June. The pattern is frequently the catalyst for substantial moves into higher territory, but it's a pattern that often disintegrates before the trade actually triggers for investors. Because of that, we'll need to see a bounce higher off of the shoulder level before this Mickey Mouse stock becomes a buy.
With shoulder level sitting right above the 50-day moving average, the potential for this trade to trigger looks slightly better than most head and shoulders plays, but I'd still recommend placing a tight stop to protect your capital. If you decide to go long, keep your stop right below the 50-day at $34.
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An "either or" play could be forming at
, the $114 billion Swiss drug maker. Along with the other stocks on today's list, Novartis has seen its share prices get battered despite strong fundamental performance in 2010. Since January, shares are down more than 8% in spite of the fact that the company's impressive pipeline should secure significant long-term growth for current shareholders.
Novartis hit double-top resistance earlier this week, causing a unique look in the company's chart (see the green circles). Typically, a double-top suggests lower share prices are in order, but I think that this stock could be forming an ascending triangle if shares stop their tumble at the black line. If not, it's time to bet against Novartis in the short-term.
If they do, don't even think about going long this stock until it breaks above its current resistance level.
Who Owns Novartis?
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
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