BALTIMORE (Stockpickr) -- It's time to get tactical. Whether you're a trader or a buy-and-hold investor, adding a tactical element to your portfolio can boost your gains and reduce risk -- especially now, with the broad market scraping up against new all-time highs for another week.
Trading tactically means loading up on high-probability setups for the current market conditions. Even though the big indices have mostly dragged sideways for the last month, there's no shortage of attractive trading setups in the individual names right now.
To get tactical, we're turning to the technical charts today for a closer look at high-probability trading setups in five large-cap stocks .
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.
Up first is big pharma firm Merck (MRK). Merck has been a strong performer so far in 2014 -- since the first session of January, this drugmaker is up more than 16% -- and it's also a name that's likely to hike its dividend payouts soon. But don't worry if you've missed the move in Merck year-to-date; shares look likely to kick off a second leg higher in August.
Merck is currently forming an ascending triangle pattern, a bullish price setup that's formed by horizontal resistance above shares (at $59 in this case) and uptrending support to the downside. Basically, as MRK's share price bounces in between those two technically important price levels, it's getting squeezed closer to a breakout above that $59 price ceiling. When that happens, we've got a buy signal in shares.
Relative strength adds some extra confidence to the MRK trade. Even while this pattern has been setting up, MRK's relative strength line has been moving in a shallow uptrend. Translation: This stock isn't just moving higher -- it's also outperforming the S&P 500 along the way.
As long as relative strength keeps making higher lows, this stock should keep beating the rest of the market.