BALTIMORE (Stockpickr) -- It should surprise no one that the price action in the big S&P 500 index has been pretty anemic in 2015. Since the calendar flipped to January, the S&P has generated price returns of 1.24% -- and we're almost halfway through the year.
But while the big stocks have been disappointing, smaller stocks have been outperforming.
Year-to-date, the small-cap focused Russell 2000 index has managed to deliver total returns of 5.2%. That means that this index of smaller stocks is on track to hit double-digit returns in 2015.
To benefit from the performance gap, we're turning to the charts for a technical look at five small stocks that look ready to make big moves.
For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.
Without further ado, let's take a look at five technical setups worth trading now.
Up first on our list of small-cap breakout trades is $1.3 billion industrial services firm Harsco (HSC). Harsco has been a major laggard vs. its small-cap peers over the course of the last year. Since last summer, this stock has dropped by more than 38%, dragged lower by hefty exposure to struggling commodity stocks.
Long-suffering shareholders could be in for a reprieve here, though, because Harsco has spent most of 2015 carving out a bottom.
Harsco has been forming a pretty textbook ascending triangle pattern, a bullish price setup that's formed by horizontal resistance above shares up at $17.50 and uptrending support to the downside. Basically, as Harsco's share price bounces in between those two technically significant price levels, it's been getting squeezed closer and closer to a breakout above our $17.50 resistance line. When that happens, we've got our buy signal.
Momentum, measured by 14-day RSI, adds some extra confidence to the upside trade in Harsco. That's because Harsco's price momentum has been making higher lows going back to last fall, providing confirmation that buying pressure is building, even while shares have consolidated below $17.50. That's a bullish divergence.
Still, it's crucial to be reactionary here. Don't try to get in ahead of a move higher; Harsco isn't a high-probability trade until $17.50 gets taken out.
We're seeing another long-term ascending triangle setup in shares of $2.3 billion uniform supplier UniFirst (UNF). In fact, UniFirst's ascending triangle pattern is a little more "textbook" than the one in Harsco. That's because it's showing up after a move higher rather than a leg down.
Either way, the trading implications are pretty much identical on a breakout above the top of the price pattern. For UniFirst, the breakout signal comes on a push above $123 resistance.
Why all of that significance at that $123 level? It all comes down to buyers and sellers. Price patterns, like this ascending triangle pattern in UniFirst, are a good quick way to identify what's going on in the price action, but they're not the actual reason a stock is tradable. Instead, the "why" comes down to basic supply and demand for UniFirst's stock.
The $123 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 $123 so significant. The move means that buyers are finally strong enough to absorb all of the excess supply above that price level.