Diageo

Diageo ( DEO) is a good example of a stock that doesn't report in euros (DEO is based in London), but is highly impacted by the eurozone markets. Because this alcoholic beverage stock generates more than a quarter of its net sales from the eurozone, it makes sense to pay attention to this name this week.

The pattern in play in Diageo is an uptrending channel. As the name suggests, an uptrending channel is a setup where a stock's trading has been bounded by dynamic support and resistance levels in an uptrend. The fact that the channel so tightly corrals DEO's price action makes the trading implications predictable for February. In this stock, traders should be waiting for a bounce off of resistance as an opportunity to build a long position in Diageo. Dual resistance lines mean that there's ample supply of shares not too far overhead.

It's also critical to wait for an actual bounce off of support before buying; support levels do eventually fail, so traders need to wait for confirmation that trendline support is going to hold up before putting cash on the line.

Diageo is one of the top-yielding food and beverage 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 MSNBC.com.

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