BALTIMORE (Stockpickr) -- Volatility is on a serious upswing in May. Yesterday, the S&P 500 closed 4.4% higher, the biggest single-day gain stocks have seen in the last 14 months. The sizable gain has been attributed to quelled fears over the eurozone debt crisis following the announcement of a European bailout package that could apply to any country in the Eurozone that faces fiscal difficulties.
But today things aren't quite so bullish, and futures are down significantly. The reason: Now investors have decided that maybe the bailout package across the pond isn't going to be big enough.
While the volatility spike is bringing back some bad memories for investors who use fundamentals alone, it's providing some big opportunities for technical traders.
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
( NWS.A) has been pushing higher in 2010 thanks to increased advertising revenues, a notable turn for an industry that had been seeing some of its biggest clients turn tail when cash flows became questionable. This week, though, the story is with News Corp.'s potential for a push higher through its trading channel.
News Corp. is most notable for its increasingly popular cable network properties, including Fox News and FX; its online media business; and its film studios. While recent acquisitions in the online market have been a bust for investors so far, increasing focus on cable network growth is the ticket to capital appreciation right now. With cable contributing around half of the company's operating profits right now, that number can only grow as Fox continues to carve out its seemingly impenetrable niche in the news and entertainment markets.
Since last summer, shares of News Corp. have been trading in an uptrending channel, bounded by well-defined support and resistance lines. Right now, shares are sitting toward the bottom of that channel, a good sign that they're on the upward swing of the stock's trading cycle. Consider going long with a stop placed below the bottom blue line.
Royal Bank of Scotland
is sitting nearly 5% lower in today's premarket following a GBP 248 million loss in its first quarter update that spurred analyst downgrades on Wall Street. But while shares of the $43 billion UK bank struggle to stay above water, a bullish technical setup could be getting us ready for an upside play this week.
RBS has been having a tougher few years than most. Following an untimely acquisition of Dutch bank ABN AMRO in 2007, RBS has had to deal with limited liquidity, mounting credit losses and controversy over the use of questionable debt instruments at the height of the bubble. Those factors lead RBS to be bailed out by the UK treasury and gave the government a sizable equity stake in the firm.
Shares of RBS made a sizable gap up in yesterday's bull run, crossing over two key resistance levels before closing 15% higher on the day. With shares set to move much lower in Tuesday's trading, the stock could be primping for a buy signal if it bounces off of the 50-day moving average. Wait for the bounce to happen before going long later this week.
Knight Capital Group
is a small-cap investment services firm that acts as a trade execution specialist for Wall Street firms as well as a market maker in the Nasdaq, NYSE, Amex and OTCBB. With a substantial increase in trading volume over the course of the past years, Knight Capital has carved out a profitable niche that's left it somewhat less prone to downside risk. And now, shares look like they could be making their next move higher.
Just because the company is less risk prone doesn't mean that it's risk free. Shares of this small-cap firm fell hard back in October 2009 on bad third-quarter numbers. But with the company's stock as significantly lower levels, and a bullish triple-bottom in shares right now, a break above the 50-day moving average could be the catalyst for a much more significant upside run.
Wait for shares to move above the 50-day; a bounce lower off of it won't do much for us here.
To see these plays 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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