BALTIMORE ( Stockpickr) -- So much for a strong start to the week.

Even though the U.S. debt debacle is on the verge of being sorted out (at least in the short term), poor timing on economic data knocked stocks down right out of the gate yesterday. But zoom out a bit from the day-to-day market news, and a more important picture starts to form for traders and investors alike.

From a technical standpoint, yesterday's 5.34 point decline in the S&P 500 is much more significant than just another down day. Instead, it's giving the market another chance to retest the secular trend line between March 2009's market lows and today. This isn't a new thing for market participants - we last tested that trend line support level back at the end of June, successfully bouncing higher as buyers piled into stocks.

In a sense, it's make-or-break time for stocks once again. With an abundance of demand for shares just below that trend line level, it's likely we'll get a volatile move if either the trend line is confirmed again (bullish implications) or shares break down below it (bearish implications).

Related: 5 Rocket Stocks to Buy for August

In the meantime, some attractive technical breakout trades are emerging on a smaller scale in individual stocks; it's time to take advantage.

Remember, 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.

Here's a look at this week's setups.


Computer giant Dell ( DELL) is posing one of the market's most pressing setups right now, following a breakdown in shares on Friday. Don't be fooled by the uptrend that shares have been seeing for the last few months -- this stock is a definite short candidate right now. Here's how you should trade it.

Dell's been moving higher for the past several months, bounded by uptrending support and resistance levels. While that normally sounds like a bullish signal for traders, there's one key difference: Dell's trend lines were converging to form a pattern known as a rising wedge. Statistically, a wedge is one of the most predictive patterns out there for a reversal -- and Dell's "sell signal" came into play on Friday.

So far, Dell hasn't been a quick mover following the breakdown; that means that traders have a second shot at taking a position in this stock. If you do decide to take the trade, I'd recommend placing a protective stop just above $16.75. Right now, the 200-day moving average looks like an easy target for shares. Consider covering just before prices get to that level.

Dell, one of TheStreet Ratings' top-rated computer hardware stocks, is one of the top holdings at Whitney Tilson's T2 Partners as of the most recently reported period.

Crown Holdings

2011 has brought strong performance for shareholders of packaging product maker Crown Holdings ( CCK) -- shares have rallied more than 15% this year, besting the broad market by a factor of seven. But this stock's bullish trajectory could be about to change thanks to a topping formation taking place in shares.

Right now, Crown is forming one of the most well-known patterns out there: the head-and-shoulders top. A head-and-shoulders formation can be identified by spotting two intermediate peaks (shoulders), with a larger peak in between them (head); it's a pattern that indicates exhaustion among buyers. Don't overplay the popularity of this pattern -- a recent academic study found that the head-and-shoulders (and its corresponding bullish pattern) are both statistically and economically significant when used with a good trading plan.

Even though the head and shoulders top in Crown Holdings is a bit more complex than the textbook example, the trading implications are exactly the same for this setup. In Crown Holdings' case, the price level to watch is $37 -- that's the neckline that needs to be broken before this stock becomes shortable.

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Time Warner

Time Warner ( TWX) is another name that's in the process of forming a bearish trading setup right now. It has been forming a descending triangle since early February, after the rally that shares had enjoyed at the beginning of the year lost its steam. Now traders should be watching the $34.50 level.

The descending triangle in shares of Time Warner is only a stone's throw from the head and shoulders top in Crown Holdings -- in both cases, we're looking at horizontal support, and lower highs. In the descending triangle, a downtrending resistance level bounds those lower highs; it's that downward slope to the stock's highs that gives this pattern negative directional bias.

Time Warner stands a good short at retesting a breakdown below that $34.50 support level today. While shares flirted with those prices yesterday, we're looking for a confirmed breakdown. That means a close below $34.50, followed by a consecutive open there as well. When that happens, supply will outbalance demand for shares, and Time Warner becomes a strong short candidate.

Time Warner is one of the highest-yielding media stocks.

National Grid

Of course, not all trading setups out there are short candidates. Even though the broad market is getting knocked around this week, there are some bullish technicals emerging in a handful of stocks. One of them is UK-based electric and gas utility National Grid ( NGG).

Right now, National Grid is forming an ascending triangle, the exact opposite from the bearish pattern that's taking shape in TWX. That means that we're seeing horizontal resistance at $50.50 and uptrending support as buyers gain momentum in this market. A push above that resistance level is the buy trigger to wait for in National Grid.

Given the fact that the $50.50 resistance level has acted like a "price ceiling" for shares for so long, a breakout above that price will likely bring about a more meaningful shift in the supply/demand balance -- and that's a very good thing for bulls. If you do decide to take this trade, consider a protective stop just below the 50-day moving average.

National Grid is one of the highest-yielding utility stocks.

Southern Company

The exact same setup is taking place in shares of a U.S.-based electric utility, Southern Company ( SO). In Southern's case, the breakout level of interest is $40.80, a price that's acted as a strong resistance level in the past three attempts that shares have made to push above it. That makes a breakout above $40.80 all the more significant.

Because the trading implications are so similar for both Sothern and National Grid, I won't belabor the implications of this ascending triangle play. Once shares break out above resistance, I'd recommend placing a protective stop just below the 50-day moving average. Don't jump the gun on these trades -- until these breakouts take place, these aren't high-probability situations.

Southern is one of TheStreet Ratings' top-rated electric utility stocks.

To see these plays in action, check out the Technical Setups for the Week portfolio at 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

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