Zimmer Holdings

Zimmer Holdings ( ZMH) is another stock that's consolidating in a rectangle pattern right now. Resistance comes in at $76 in the pattern, while support is down at $72. Like WPP, this stock is bull-biased, so it makes sense to watch for a move above $76 as a buy signal.

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With any technical pattern, it's critical to think in terms of buyers and sellers -- not shapes. After all, triangles, head and shoulders patterns and the like are a good way of describing what's happening on a chart, but they're not the reason why it's tradable. Instead, that all comes down to the supply and demand caused by those buyers and sellers.

The horizontal resistance level at $76 is a place where a glut of sellers has been willing to step in and put a ceiling in the stock. A breakout means that increasingly eager buyers have absorbed all of the excess supply for shares sitting at that level -- and without that barrier in place, shares have room to rally to the upside (the opposite is true on a drop through $72).

Either way, if you trade ZMH, keep a tight protective stop in place.

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