BALTIMORE (Stockpickr) -- As expected this week, earnings and economic data are having a controlling effect on the market, prompting the market to open slightly lower this morning. Don't put too much emphasis on an early morning market drop. The market's current bent is likely more indicative of investor anxiety than a bearish turn.
That anxiety comes largely from the fact that the economy continues to feature a flat recovery despite record-low interest rates and quantitative easing efforts. Coupled with the rally stocks have seen in the last two months, it's not surprising that investors fear a short-term top in stock valuations.
But forget the fundamentals for a minute.
This week, we're taking a look at three promising technical setups to wring maximum upside out of the market. 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.
Here's a look at
is a massive London-based bank with an enviable footprint in Asia -- one of the regions in the world that's currently benefitting from economic tailwinds and record wealth.
That exposure to the Far East hasn't spared this stock from seeing a year-to-date slide, though, and shares of HSBC are down more than 8% since the beginning of the year. But that could be about to change thanks to a bullish technical pattern forming in this stock's chart.
HSBC has been forming an ascending triangle pattern since the beginning of July, when shares rallied up to resistance at $53. One of the easiest patterns to spot, the ascending triangle is characterized by a horizontal resistance level and higher lows. As the trend line of the higher lows intersects with the resistance line, shares have the potential to get squeezed to a breakout.
For this bank, that breakout triggers on a push above the $53 dollar level. That means more than just printing a price above $53 -- we'll want to see two consecutive opens above that level before calling HSBC a buy. For maximum downside protection, place a protective stop right around $52.50.
>>Who Owns HSBC?:
$3.6 billion business services firm
has already fared a bit better than HSBC this year. Shares of the company are up nearly 10% in 2010, but higher levels could still be in order before the last trading day of December.
Genpact hit the 50-day moving average in yesterday's trading, a common support level that acts as a sort of price floor for share price. Better still, with the 200-day moving average (another, stronger support level) just below that, Genpact has a spot of double-resistance right now. That means sellers will have to come out in force to send this stock's price down to the sub-$15 level.
>>Who Owns Genpact?:
But there's more to the moving averages that just that. The crossover of the 50-day moving average above the slower 200-day moving average earlier this month is a bullish signal that suggests share prices could enjoy a boost in the near-term even without those nearby support levels. It's likely Genpact will see a bounce higher off of support. I recommend staying away until the bounce actually happens. Then consider buying on the second day up. A $19 price target seems realistic based on previous highs.
While we've focused on bullish setups with our last two plays, technical trade need not be exclusively to the upside. Such is the case with
, a lawn care company that looks pointed lower right now.
Shares of Scotts have been enjoying an uptrending channel that's sent shares nearly 25% higher since July -- but with Tuesday's touch of resistance, Scotts could be headed down to the bottom of that channel.
Normally, an uptrending channel is a very bullish sign, but that changes when shares of a stock are at the upper resistance level. In Scotts' case, a fall to around $52 is likely in the short term given shares' positioning and overbought momentum. I'd recommend betting against shares on a move toward support, then turning around and going long on a bounce off of the lower blue line.
To see these plays in action, check out the
-- Written by Jonas Elmerraji in Baltimore.
Follow Stockpickr on
and become a fan on
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.