BALTIMORE (Stockpickr) -- The back-and-forth between buyers and sellers is continuing this April. After last week's hard selloff, stocks are ratcheting higher again to test the exact same levels we were at just five sessions ago.
Whether you're bullish or bearish right now, this is a "two steps forward, one step back" market. But just because the S&P 500 is getting batted back and forth doesn't mean that you need to go through the turbulence too. As I write, lots of names are finally starting showing signs of a buy signal.
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 ING Groep (ING), the $52 billion Dutch financial firm. ING has been a major performer for the last year, rallying more than 76% in those trailing 12 months. If you missed the move in ING, don't worry. This stock looks like it's setting up for another big leg higher. Here's why.
ING is currently forming an ascending triangle pattern, a bullish price setup that's formed by a horizontal resistance level above shares (at $15 for ING right now) and uptrending support to the downside. Basically, as ING gets bounced in between those two key levels, it's squeezing closer and closer to a breakout above that $15 price ceiling. When $15 gets taken out, we've got our buy signal.
Relative strength adds some important backup for a buy signal in ING. That performance indicator has been in an uptrend since back in August, a signal that ING is continually outperforming the S&P in good times and in bad ones. As long as the broad market remains in "correction" mode, relative strength is the single most important indicator you can have in your trading toolbox.
Aegon (AEG) is the second large-cap Dutch financial firm to make our "buy" list this week -- albeit for a different reason. Like ING, Aegon has seen a big rally in the last year: shares have climbed more than 42% since last April. And while shares of AEG have been consolidating sideways since the calendar flipped over to January, that's actually the exact reason this stock looks tradable here.
Aegon is forming a rectangle pattern, a price setup that's formed by a pair of horizontal resistance and support levels that basically "box in" shares between $9.50 and $8.50. Rectangles are "if/then patterns." Put a different way, if AEG breaks out through resistance at $9.50, then traders have a buy signal. Otherwise, if the stock violates support at $8.50, then the high-probability trade is a sell. Since Aegon's price action leading up to the rectangle was an uptrend, it favors a move to the upside.
At first glance, it looks like AEG's chart is full of price gaps. No, that doesn't mean that this name is especially volatile. Those gaps, called suspension gaps, are the result of off-hours trading on the Euronext exchange. From a technical standpoint, you can ignore them.
Exxon Mobil (XOM) is another stock that looks technically bullish right now and you don't have to be an expert trader to see why. Exxon has been in an uptrend since the start of February, rallying 8.4% in the two months since. Now we're getting an important buy signal in this oil and gas supermajor this week.
XOM 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. XOM'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. While Exxon's bounce really happened at the beginning of this week, it's not a bad idea to scale into a position in XOM here. Just be ready to go up to a full-sized position on the next bounce off of support.
Another indicator is confirming XOM's attractiveness here: momentum, measured by 14-day RSI, has been in an uptrend of its own since late January. Since momentum is a leading indicator of price, it bodes well for this rally's staying power.
We're seeing the exact same setup in shares of big American bank Wells Fargo (WFC). Like Exxon, Wells is forming an uptrend right now, but unlike the energy giant, this big bank's uptrend is much longer-term and more buyable here. WFC bounced off of trend line support at the start of this week too, but it's become less extended within the channel. Consider building a position in Wells Fargo here.
Waiting for this week's support bounce was a critical part of the equation in WFC 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 WFC can actually still catch a bid along that line before you put your money on shares.
Last up today is pure-play graphics card maker Nvidia (NVDA). Nvidia has been a performance standout in 2014, rallying more than 15% since the start of the year. For comparison, the tech-heavy Nasdaq Composite is down 2.16% over that same period. But NVDA is on our list today because it's got more upside ahead of it.
NVDA is currently forming a "rounding bottom" pattern. The rounding bottom is a price setup that indicates a gradual transition in control from sellers to buyers. The patterns name is a pretty good description of how it looks on a chart even though NVDA's rounding bottom came in at the top of its recent price range (not the bottom), the trading implications are just the same. The buy signal comes on a move through resistance at $19.
Why all the significance at $19? It all comes down to buyers and sellers. Price patterns are a good quick way to identify what's going on in the price action, but they're not the reason a stock is tradable. Instead, the "why" comes down to basic supply and demand for NVIDIA's stock.
The $19 resistance level is a price where there has been an excess of supply of shares; in other words, it's a spot where sellers have previously been more eager to step in and take gains than buyers have been to buy. That's what makes a breakout above $19 so significant -- the move means that buyers are finally strong enough to absorb all of the excess supply above that price level. Wait for shares to catch a bid above resistance before you buy it.
To see this week's trades in action, check out the Must-See Charts portfolio on Stockpickr.
-- Written by Jonas Elmerraji in Baltimore.