BALTIMORE (Stockpickr) -- The short week got off to a bullish start yesterday, as the S&P 500 put a little more distance in between its open and its close. That puts the big index just half a percentage point away from the all-time highs it made in January.
Not too shabby for a rally that no one believed in just a few weeks ago.
If lingering near highs sounds "toppy," don't worry too much. Since 1982, around half of all market sessions have ended within 5% of all-time highs. That means this recent "frothiness" isn't unsustainable; it's a return to normalcy. The fact of the matter is that despite the day-to-day chop of trading, equities are unquestionably in bull mode as I write.
To make the most of it, we're turning to our "buy list" with five stocks that look ready to make a technical move higher.
For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action 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.
Without further ado, let's take a look at five technical setups worth trading now.
Hyster-Yale Materials Handling
Small-cap truck lift company Hyster-Yale Materials Handling (HY) - Get Hyster-Yale Materials Handling, Inc. Class A Report isn't exactly a household name -- but the trading setup this stock is showing off should be. After rallying more than 76% in the last 12 months, this Cleveland-based industrial name looks ready to extend its gains in 2014. Here's how.
Hyster-Yale is currently forming a textbook ascending triangle pattern, a price setup that's formed by horizontal resistance above shares at $95 and uptrending support to the downside. Basically, as HY bounces in between those key technical levels, it's getting squeezed closer and closer to a breakout above that $95 price ceiling. When that happens, we've got our buy signal in shares.
HY's pattern has been forming since last September that makes it a long-term pattern with equally long-term upside implications when it triggers. When the move through $95 does happen, I'd recommend keeping a protective stop protective stop just below the most recent swing low at $80.
We're seeing the exact same setup right now in shares of beverage stock Cott (COT) - Get Cott Corporation Report, but with a twist. COT is forming a long-term ascending triangle bottom, a reversal pattern that forms at the bottom of a stock's recent price range. Even though the chart looks pretty different at first glance, horizontal resistance and uptrending support are the tip-offs that this is an ascending triangle trade.
The buy signal comes on a move through $8.75.
That's because whenever you're looking at any technical price pattern, it's critical to think in terms of those buyers and sellers. Triangles and other pattern names are a good quick way to explain what's going on in a stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares.
That $8.75 resistance level is a price where there has been an excess of supply of shares; in other words, it's a place where sellers have been more eager to step in and take gains than buyers have been to buy. That's what makes a breakout above it so significant -- the move means that buyers are finally strong enough to absorb all of the excess supply above that price level. Wait for $8.75 to get busted before taking the trade.
You don't have to be an expert technical analyst to figure out what's going on in Mondelez International (MDLZ) - Get Mondelez International, Inc. Class A Report. This $60 billion snack stock is showing traders a setup that's about as simple as they get. And it means that even after a 30% rally in this blue chip name over the last year, more upside looks likely.
Mondelez is currently bouncing higher in an uptrending channel. When it comes to channels, up is good and down is bad -- it's really just as simple as that. Mondelez's channel is bounded by resistance above shares and trend line support below them; those two parallel trend lines provide a high probability range for MDLZ to trade between. And so, as shares bounce off of support for a fifth time since last summer, it makes sense to buy the bounce.
Waiting to buy off a support bounce makes sense for two big reasons: It's the spot where shares have the furthest to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before you know you're wrong). Remember, all trend lines do eventually break, but by actually waiting for the bounce to happen first, you're ensuring MDLZ can actually still catch a bid along that line before you put your money on shares.
Iconix Brand Group
We're seeing the same kind of trade setup in shares of apparel name Iconix Brand Group (ICON) - Get Iconix Brand Group, Inc. Report. Like Mondelez, Iconix is bouncing higher in a trend channel that's been in play since the summer. But ICON could have some extra breakout potential thanks to a resistance level at $40 that's getting tested this week.
Shares of ICON have attempted to break out above $40 three times now since November, and they've been batted down on each of those attempts. But as that trend line support level pushes buyers up against the selling pressure at $40, the chances of a breakout to the upside are looking good. After all, since support has been strong enough to catch the last three corrections in ICON, that resistance at $40 should be less of a challenge to overcome.
Even better, relative strength has been outstanding over the same time period, sporting an uptrend of its own. That means that despite the S&P's impressive returns over the past year, ICON keeps managing to do one better. If buyers can take out resistance at $40 this week, it makes sense to build a position in this name.
Last up, but certainly not least, is Campbell Soup (CPB) - Get Campbell Soup Company Report. Campbell hasn't exactly been a blockbuster name to own in the last year. Since last February, it has gained a measly 9.8%, less than half of what the S&P 500 turned out over the same timeframe. But CPB shareholders could be about to make up for lost time.
Campbell is currently forming an inverse head and shoulders pattern, a bottoming setup that indicates exhaustion among sellers. The pattern is formed by two swing lows that bottom out around the same level (the shoulders), separated by a deeper low (the head). The buy signal comes on a move through the neckline, which is right at $43. That price level is getting tested in today's session. If it holds, consider it a very important buy signal for CPB.
Momentum, measured by 14-day RSI, adds some evidence that the breakout is going to hold: it's been making higher lows since the pattern started forming. Since momentum is a leading indicator of price, that bodes well for buyers. If you decide to be one of them, I'd suggest keeping a tight stop in place.
To see this week's trades in action, check out the Technical Setups for the Week portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.
Follow Stockpickr on Twitter and become a fan on Facebook.
At the time of publication, author had no positions in stocks mentioned. Jonas Elmerraji, CMT, is a senior market analyst at Agora Financial in Baltimore and a contributor to TheStreet. Before that, he managed a portfolio of stocks for an investment advisory returned 15% in 2008. He has been featured in Forbes , Investor's Business Daily, and on CNBC.com. Jonas holds a degree in financial economics from UMBC and the Chartered Market Technician designation. Follow Jonas on Twitter @JonasElmerraji