Technical Setups: Illumina, LDK Solar, Edison

A handful of technical setups in stocks such as LDK Solar and Illumina could provide potential gains right now.
Author:
Publish date:

BALTIMORE (Stockpickr) -- The market is working hard to be positive despite weak economic data, including yesterday's September consumer confidence numbers, which marked the first negative showing since February. Part of the blow was mitigated by strong showings from key companies, including Walgreen (WAG) , which gained 11.4% on good earnings by Tuesday's close.

Today should remain relatively quiet on the news front as Wall Street preps itself for

Fed

Chairman Bernanke's testimony before the Senate banking committee tomorrow. Ultimately, Bernanke's appearance on Capitol Hill will have zero effect on the market (the meeting is about regulatory overhaul, not economic policy), but expect volatility to be light ahead of the meeting anyway.

Like I said last week, the technicals continue to be especially appealing right now following a high-profile move at the beginning of last week. That means that a handful of technical setups could provide potential gains right now.

>>> Must-See Charts: Adobe, Bank of America, eBay

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

this week's potential trades

.

Mid-cap scientific instrument maker

Illumina

(ILMN) - Get Report

has enjoyed a colossal run-up so far in 2010. Shares of the company are up approximately 63% this year thanks to surprisingly good financial performance and an enviable market position in the genetic technology business.

The company manufactures equipment used in genetic analysis, a hot spot in the scientific community right now. With a large installed base, this company stands to pull in significant recurring revenue from the consumables used in its machines. And this week, shareholders could see rally in the short term.

A series of lawsuits and Wall Street guidance overreactions sent share prices tumbling toward the end of 2009, creating an irreplaceable opportunity for investors who bought at the turn of 2010. Since then, shares have been bouncing higher in an uptrending trading channel -- but a break above resistance could be a signal that shares want to go much higher.

>>>Top-Rated Life Sciences Stocks

That

breakout

pushed Illumina to a fresh 52-week high, and it also sent momentum barreling toward overbought territory. Now that shares are consolidating, investors could be looking at a good time a build a position in this stock. There is plenty of downside support in shares, but not close enough for comfort. Consider placing a stop just above $48 if you decide to take this trade.

China-based

LDK Solar

(LDK)

was one of Wall Street's sweetheart stocks during the solar boom we saw just a few years ago (the joke being that adding "solar" and "China" to any company's name would immediately boost its share price during that time). But that hasn't been the case of late.

While this company continues to be a strong performer, a pullback in solar spending coupled with thin margins in wafer production have left many investors skirting this stock for the last two years. But fundamentals aside, this company could be due for some more upside this year.

A slow return to interest in solar companies gave LDK a much-needed boost in second-quarter earnings last week, pushing shares to a big breakout that continued into this Monday. While the company pulled back yesterday, setting resistance at $10.50, it's currently unclear just how staunch that resistance level is.

>>>10 Emerging Markets Stocks to Watch

A week of horizontal consolidation could precede another push to higher ground, and with new 52-week highs set this week, investor sentiment in this stock should support that. Regardless, this play is more on the speculative side right now. Don't consider going long unless LDK cracks $10.50.

While I'm normally a big fan of investing in boring stocks for value or income investors, they're considerably less attractive for traders. That's because stable quarterly performance, reliable dividends and little in the way of breaking news generally keeps trading fairly flat. Not necessarily so, though, with shares of

Edison International

(EIX) - Get Report

, an otherwise boring $11.3 billion California power utility with a 3.6% dividend yield.

Edison has been trading in a relatively predictable pattern for the last several months, bouncing continually on support at the 50-day and 200-day moving averages, and testing new highs each week. Now, with shares dipping from a test of resistance at $35, investors could soon be in the perfect spot to scoop up shares for a move back upward.

Not yet, though. We'll need to see a bounce off of support first, likely at the 200-day moving average. A bullish moving average crossover should help give Edison extra wherewithal for that upward push this week. There's nothing boring about that.

>>>Who Owns Edison?: Hotchkis & Wiley

To see these plays in action, check out the

Technical Setups for the Week portfolio

on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

RELATED LINKS:

>>8 Risky Euro Bank Stocks to Avoid

>>Stocks Third Point Is Buying in 2010

>>4 Stocks Setting Up to Break Out

Follow Stockpickr on

Twitter

and become a fan on

Facebook.

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.