Editors' pick: Originally published Nov. 9.
Donald Trump's election win in the wee hours of Wednesday morning wasn't the only thing that surprised the pundits about this week's election bombshell. The stock market's reaction to it was another. After seeing S&P 500 futures limit down overnight, the big market averages pulled an about-face by lunchtime, finishing with 1.1% rally in the S&P by the time the closing bell rang Wednesday.
That pent-up positive energy for stocks is sending an important signal for investors: With the big, black clouds of the election finally out of the way, U.S. markets are well positioned to finally break free of the sideways slump in the S&P 500 that's basically left the S&P treading water for the past two years.
More importantly, it's happening as the big market averages sit just a percentage point below all-time highs for the stock market. Put simply, another day like Wednesday and the S&P 500 will be higher than it's ever been in history.
To take advantage of the surprise upside in stocks, we're turning to the charts for a technical look at five huge stocks that are breaking out after Donald Trump's election win.
First, a quick note 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...
Canadian banking giant Toronto-Dominion Bank (TD) wasn't one of the beneficiaries of yesterday's rally. While U.S. financials had a huge day Wednesday, TD Bank actually corrected slightly. But don't count TD Bank out yet. This big financial operator is on the verge of a big breakout this fall. Here's how to trade it.
For the last several months, TD Bank has been forming an ascending triangle pattern, a bullish continuation setup that's formed by horizontal resistance up above shares at $45.50, and uptrending support to the downside. Basically, as TD Bank bounces in between those two technically significant price levels, it's been getting squeezed closer and closer to a breakout through that aforementioned $45.50 price ceiling. When that breakout happens, we've got a clear-cut buy signal in TD.
This stock's positive performance is nothing new. In fact, year to date, TD Bank is up more than 15.5% on a price basis alone, leaving its American big banking peers in its dust. That leadership has translated into the relative strength uptrend down at the bottom of Toronto-Dominion Bank's chart.
That uptrend indicates that this stock has been outperforming the broad market all year long, and continues to do so here, even in spite of yesterday's correction. As long as TD's relative strength line keeps tracking higher, this stock is statistically predisposed to keep on outperforming in the long run.