Ecopetrol

Another channel worth watching right now is the horizontal consolidation channel that's been reigning in price action in shares of Ecopetrol ( EC). Unlike the channel up, a sideways consolidation channel doesn't have any directional bias -- that's why I like to refer to them as "if/then trades."

Because price movement is sideways, it doesn't make sense to take a position while shares trade within the channel. Instead, it's best to wait for a breakout in either direction -- here's where the if/then element comes in. If shares break above resistance, go long; otherwise, if shares tumble through support, this becomes a short play. Either way this trade pans out, consider a protective stop just inside the channel.

To see these plays in action, check out the Technical Setups for the Week portfolio on Stockpickr.

-- Written by Jonas Elmerraji in Baltimore.

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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.

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