BALTIMORE (Stockpickr) -- The buyers and sellers are continuing to battle it out this week, as the big indices press up against all-time highs once again. No, yesterday's 0.29% gain wasn't a blockbuster session, but the price action was still undeniably bullish. Advantage buyers.
But while all eyes are on the drama that's unfolding in a particularly challenging broad market, there are some more straightforward trades popping up in the individual names. To take advantage of them, we're turning to the charts.
If you're new to technical analysis, here's the executive summary.
Technicals are a study of the market itself. Since the market is ultimately the only mechanism that determines a stock's price, technical analysis is a valuable tool even in the roughest of trading conditions. Technical charts are used every day by proprietary trading floors, Wall Street's biggest financial firms, and individual investors to get an edge on the market. And research shows that skilled technical traders can bank gains as much as 90% of the time.
Every week, I take an in-depth look at big names that are telling important technical stories. Here's this week's look at five high-volume stocks to trade this week.
First up is $15 billion financial firm Fiserv (FISV). At a glance, Fiserv's price performance has been pretty solid over the last six months or so; shares are up more than 13% over that stretch.
Solid as that may be, FISV has really done little more than keep pace with the broad market. That's not a knock against FISV in 2014, though. This stock's real gain potential is still ahead of it.
That's because FISV is currently forming an ascending triangle pattern, a bullish price setup that's formed by horizontal resistance above shares at $59 and uptrending support to the downside. In short, as Fiserv's stock bounces between those two technical price levels, it's getting squeezed closer and closer to a breakout above our $59 resistance price. When that happens, we have our buy signal.
Fiserv's ascending triangle trade has been forming since November, making it a longer-term setup. In turn, this stock comes with longer-term upside implications when the breakout above $59 does happen. If you decide to buy the move in FISV, keep a protective stop at $55.50.
Internet giant Yahoo! (YHOO) is forming a triangle trade of a different sort this week.
Yahoo! has been consolidating in a symmetrical triangle, or "coil" pattern, for the last couple of months, bouncing its way sideways between a pair of converging trend lines. Consolidation patterns such as the symmetrical triangle are common after big moves -- they give investors a chance to catch their breath and figure out their next moves. So after the 55% rally in shares of Yahoo! over the last year, it's not surprising that this stock is slinking sideways now. The buy signal comes on a breakout to the topside of the pattern, currently right at the $39 level. If shares can take out $39, then we've got a strong indication that buyers have regained control of shares.
One important factor to keep in mind with coil trades like Yahoo!'s is the fact that they tend to come with violent breakouts. That's because YHOO's price volatility is getting constricted by the converging trend lines in shares, reducing until the point where the stock breaks out of the triangle. Since stock volatility is cyclical (it swings from periods of low volatility to high volatility), the relatively low volatility of YHOO here is most likely to be followed up with a big, fast move.
We're seeing the exact same setup in shares of $18 billion medical device stock Boston Scientific (BSX) right now. Like Yahoo!, BSX is a textbook symmetrical triangle trade, coiling between its own pair of converging trend lines. The big difference is where shares of BSX are sitting right now.
The buy signal comes on a breakout to the topside of the pattern, currently at $13.70. That means that BSX is testing a breakout in this morning's session. Traders can be a little more aggressive with a buy signal in BSX because of momentum, measured by 14-day RSI. Our momentum gauge broke out of a downtrend this week, and that puts a higher probability on price following suit.
Still, it's crucial to wait for price to make its move before jumping into a trade in BSX. Avoid being a buyer until shares can close above our $13.70 trendline. After that, the 50-day moving average is a good place for a protective stop.
The last year has been tough for shares of contract oil and gas driller Ensco (ESV). The $24 billion stock has slipped more than 13% in those trailing 12 months, a return that's particularly egregious given the fact that the S&P 500 has climbed 20% over that same stretch of time. But fortunes could finally be turning for owners of ESV this week.
Ensco is currently forming a double bottom pattern, a bullish reversal pattern that looks exactly like it sounds. The setup is formed by a pair of swing lows that bottom out at approximately the same price level. The buy signal comes on a push through the peak that separates them; for ESV, that price level came in at $52. More important, it got taken out last week.
Now, shares are "throwing back" to retest newfound support at that $52 price level. While the throwback looks a little ominous now, traders should treat it like a second low-risk chance at an entry in shares of ESV. Momentum has been making higher lows since February, a bullish divergence with price that points to buyers controlling the reigns in this name.
Wait for the bounce off of $52 -- then ESV is a buy again.
Bank of America
Last, but far from least, is big bank Bank of America (BAC). Best of all, you don't need to be an expert technical analyst to figure out what's going on in shares of this $181 billion banking behemoth a simple look at the chart should do.
Bank of America is currently bouncing higher in a textbook uptrending channel. When it comes to channels, up is good and down is bad. It's really just as simple as that. BAC's channel is bounded by resistance above shares and trend line support below them; those two parallel trend lines provide a high-probability range for shares of this stock to trade between. And so, as shares come up on trend line support for a fifth time since November, it makes sense to buy the bounce.
Waiting to buy off a support bounce makes sense for two big reasons: It's the spot where shares have the furthest to move up before they hit resistance, and it's the spot where the risk is the least (because shares have the least room to move lower before you know you're wrong). Remember, all trend lines do eventually break, but by actually waiting for the bounce to happen first, you're ensuring BAC can actually still catch a bid along that line before you put your money on shares.
Finally, relative strength in Bank of America has been stellar over the course of the channel. That means that this stock is rallying harder than the broad market on the way up, and correcting less deeply on the way down. That's a critical show of strength as anxiety creeps into the market right now.
To see this week's trades in action, check out the Must-See Charts portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.