BALTIMORE (Stockpickr) -- July is almost at an end, and investors don't have much to show for it. Since January, the big S&P 500 index has only managed to climb 2.4% higher, and only about half of all the individual stocks in the index are even up on the year so far.
But that's not the whole story with stocks in 2015 -- not even close.
You see, while only about half of the S&P is up year-to-date, the ones that are happen to be up a lot. In fact, about 60% of S&P 500 components that are positive for the year are actually up 10% or more in 2015. There's an important lesson in play here: buying leaders is a pretty effective strategy in this market.
And some of Wall Street's biggest stocks looked primed for even higher ground in the second half of the year. To find them, we're turning to the charts to take a closer technical look at five huge stocks to trade for gains…
First, a little on the technical toolbox we're using here: technical analysis is 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 big stocks to trade.
Up first on the list is $703 billion tech titan Apple (AAPL - Get Report). Apple has been one of those stocks that's working this year; shares are up 11.4% since the calendar flipped to January, even after last week's earnings-induced drop. The recent correction in Apple is looking like a big buying opportunity.
Since February, Apple has been trading in a sideways price range called a rectangle pattern. It gets its name because the pattern basically "boxes in" shares between horizontal support and resistance lines. For Apple, the levels to watch are resistance up at $132.50 and support at $122. Even though Apple got hit following earnings, shares are settling in just above our $122 price floor, which means that, from a technical standpoint, nothing has changed here. Short-term, a bounce off of $122 support looks like a good buying opportunity.
Zooming out on the chart a bit, resistance up at $132.50 is the level to watch. That's because, since Apple's prior trend was up at the start of 2015, it favors breaking out above $132.50. When Apple can clear that $132.50 level, that's when it makes sense to scale into a full-sized position in this stock.
No doubt about it, Apple still looks bullish in the long-term.
At a glance, it doesn't look like life insurer Metlife (MET - Get Report) has done a whole lot better than the S&P 500 this year. Shares are only up 5.8% in 2015. But more recently, the momentum in this insurance stock has been a whole lot more impressive: since shares bottomed back in February, Metlife is up more than 23%. Now, shares look primed for a second leg higher thanks to a classic technical setup that's forming in shares.
Metlife is currently forming an ascending triangle pattern, a bullish price pattern that's formed by horizontal resistance above shares at $58 and uptrending support to the downside. Basically, as Metlife bounces in between those two technically-significant price levels, it's been getting squeezed closer and closer to a breakout above our $58 price ceiling. When that happens, we've got our breakout buy signal.
Relative strength (not to be confused with RSI) adds some extra confidence to buying Metlife right now. That's because our relative strength line has been in an uptrend since April, an indication that Metlife is consistently outperforming the rest of the market long-term. When shares clear $58, it's time to buy Metlife.
$21 billion Canadian telco Telus (TU - Get Report) is showing traders the exact same setup right now. The only big difference in shares of Telus is the fact that the ascending triangle setup is showing up near 2015's lows, not at the top of a rally (as it is in Metlife). But even though Telus' price action isn't textbook, it's tradable here. The breakout level to watch is $35 in Telus.
Why all of that significance at that $35 level? It all comes down to buyers and sellers. Price patterns, like this ascending triangle setup in Telus, 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 Telus' stock.
The $35 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 $35 so significant -- the move means that buyers are finally strong enough to absorb all of the excess supply above that price level.
Like with any breakout trade, it's important to be reactionary here. Don't buy Telus until buyers are able to shove this stock above $35.
No two ways about it, JPMorgan Chase (JPM - Get Report) is having a good year. In the last 12 months, this $252 banking stock has rallied nearly 17%, leaving the rest of the S&P 500 in its dust. The good news is that JPMorgan is still a "buy the dips stock" this summer -- and you don't need to be an expert technical trader to figure out why.
JPMorgan Chase has been bouncing its way higher in a well-defined uptrending channel for most of the year, catching a bid on every successive test of trendline support. Put simply, every test of the bottom of JPMorgan's price channel has given traders a low-risk, high-reward opportunity to build a position -- and shares are testing that support line this week. That means it's time to buy the bounce in JPMorgan.
Waiting for that bounce is important for two key reasons: It's the spot where shares have the most room 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 the channel breaks, and you know you're wrong). Remember, all trend lines do eventually break, but by actually waiting for a bounce to happen first, you're ensuring JPMorgan Chase can actually still catch a bid along that line before you put your money on shares.
Last up on our list of breakout trades is retail giant Wal-Mart (WMT - Get Report). Unlike most of the other names on this list, Wal-Mart hasn't been much of a performance leader lately. In fact, this stock has lost almost 16% of its market value just since January. But all that could be about to change. Wal-Mart is currently looking "bottomy" for the first time in a long time.
Wal-Mart is forming a double bottom pattern, a bullish reversal pattern that looks just like it sounds. The setup is formed by a pair of swing lows that find support at approximately the same price level. The buy signal comes on a breakout through the peak that separates though two troughs. For Wal-Mart, that's the $74 resistance level. If $74 gets taken out, we've got our buy signal.
Momentum, measured by 14-day RSI, adds some extra upside confidence to the setup in Wal-Mart. Our momentum gauge has been in an uptrend since last month, making higher lows during Wal-Mart's pair of price lows. That's a bullish divergence that indicates that buying pressure has been building under the surface. When $74 gets taken out, Wal-Mart becomes a buy.