Stryker

Finally, I want to follow up with a stock that we looked at earlier this month, Stryker ( SYK). Like AIG, Stryker has been forming an inverse head and shoulders pattern -- just a much longer-term version of one.

This past week, shares finally broke above their $55 neckline, triggering a buy signal for traders. Now, a throwback is giving buyers a second chance at a low-risk entry on this trade. A throwback is the move back down to the neckline in shares of SYK - and it's actually a good signal for investors.

That may seem surprising. After all, shares have been sliding - but a throwback gives SYK the chance to confirm the strength of its newfound support level at $55. I'd recommend buying this name on the next white bar day above $55.

And lest you think that the head and shoulders is too well known to be worth trading, the research suggests otherwise: a recent academic study conducted by the Federal Reserve Board of New York found that the results of 10,000 computer-simulated head-and-shoulders trades resulted in "profits that would have been both statistically and economically significant."

That makes both SYK and AIG worth watching closely this week.

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.

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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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