Big stocks are having an equally big year in 2017 - as I write, one in four S&P 500 components is up 15% or more since the start of the calendar year. That's a quarter of the biggest stocks on the market that are up at least double the rest of the index year-to-date.
More importantly, there's a lot more where that came from.
As I write, some of Wall Street's biggest stocks are teetering on the edge of breakout territory, signaling more upside ahead. To figure out which ones are about to springboard higher (and when to buy them), we're turning to the charts for a technical look at three large-cap trades that are about to send buy signals.
First, a quick note on the technical toolbox we're using here: technical analysis is a study of the market itself. Since the market is ultimately the only mechanism that determines a stock's price, technical analysis is a valuable tool even in the roughest of trading conditions. Technical charts are used every day by proprietary trading floors, Wall Street's biggest financial firms, and individual investors to get an edge on the market. And research shows that skilled technical traders can bank gains as much as 90% of the time.
Every week, I take an in-depth look at big names that are telling important technical stories.
Here's this week's look at three big stocks to trade.
Up first on the list is $170 billion banking behemoth Citigroup (C) - Get Citigroup Inc. Report. Citi is without a doubt the best-positioned of the big banks from a technical perspective right now. Outperformance isn't new here - Citi has rallied more than 21% higher in the trailing six months, outperforming the rest of the broad market by a big margin. The good news is that shares are pointing to a second leg higher this spring.
Citigroup's price pattern is an ascending triangle setup, a bullish continuation pattern that's formed by horizontal resistance up above shares at $62, and uptrending support to the downside. Basically, as Citi pinballs in between those two technically important price levels, it's been getting squeezed closer and closer to a breakout through that $62 price ceiling. Once that move happens, Citi becomes a buy.
Relative strength, measured by the line in the bottom panel of Citigroup's chart, has been holding onto an uptrend since last summer, an indication that the outperformance in this stock is persisting in 2017. Once shares can clear $62, it makes sense to pull the trigger on this trade.
Meanwhile, things haven't looked quite so attractive in shares of $79 billion tech stock Qualcomm (QCOM) - Get QUALCOMM Incorporated Report. Qualcomm has lost almost 20% of its market value since the calendar flipped to January, underperforming the rest of the S&P by a big margin. But Qualcomm shareholders could be about to get a break; this stock is carving out a bottom in the long-term.
Qualcomm's price setup is a double bottom, a bullish reversal setup that looks just like it sounds. The double bottom is formed by a pair of swing lows that bottom out at approximately the same level. Those two lows are separated by a peak that identifies the breakout level to watch in Qualcomm: it's up at $59 on this stock's chart. Put simply, if Qualcomm can muster the strength to push back above $59 this spring, we've got an important buy signal in shares.
Price momentum, measured by 14-day RSI up at the top of QCOM's chart, adds some extra confidence to the price pattern. Slightly higher lows in RSI mean that buying pressure has been building at these lower price levels. Once shares close above $59, look for a re-test of last fall's highs.
China Life Insurance Co. Ltd.
Last on our big-cap buy list is $102 billion overseas life insurer China Life Insurance (LFC) - Get China Life Insurance Company Limited American Depositary Shares Report. You don't need to know anything about technical analysis to figure out what's happening on this chart: China Life has been bouncing its way up and to the right since the end of last May.
And it's still a buy-the-dips stock this spring.
China Life has been bouncing its way higher in a well-defined uptrending channel, a bullish price setup that's about as simple as they get. Put simply, every test of the bottom of that price range so far has provided a low-risk, high-reward buying opportunity in LFC - so as shares test that trendline for the eighth time here, it makes sense to buy the latest bounce higher.
If you decide to pull the trigger on China Life here, $14 is a logical place to park a protective stop.
At the time of publication, the author had no positions in the stocks mentioned