The S&P 500 has been taking a breather for more than a month now, but don't let that fool you--a large chunk of Wall Street's biggest stocks are pushing to new highs in April.
Case in point: 34 of the stocks in the S&P actually hit new 52-week highs during Wednesday's trading session. And a whopping 39% of all S&P 500 components have hit new 52-week highs since the index itself peaked on March 1. In short, while investors keep on hemming and hawing about the broad market's ability to sustain higher ground in 2017, a substantial chunk of that market has been doing just that.
More importantly, a major contingent of some of Wall Street's biggest stocks are teetering on the edge of breakout territory in April ...
So, to figure out which big-name stocks look ready to outperform in the weeks ahead, we're turning to the charts for a technical look at four that are showing off bullish chart patterns ...
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 four big stocks to trade ...
Leading things off is telco giant AT&T Inc. (T - Get Report) . AT&T has been looking attractive for a while--and after charging more than 15% higher off of its November lows, this stock looks primed to kick off a second leg higher in April. Here's how to trade it ...
Since the calendar flipped to January, AT&T has been forming a textbook example of an ascending triangle pattern, a bullish continuation setup that's formed by horizontal resistance up above shares at $42.50, and uptrending support to the downside. Basically, as AT&T pinballs between those two technically important price levels, shares have been getting squeezed closer and closer to a breakout through the $42.50 level. When that happens, we've got a buy signal.
Remember to be reactionary here--don't try to get in ahead of the breakout signal. AT&T doesn't become a high-probability upside mover until shares are able to muster the strength to catch a bid above $42.50. From there, prior lows at $40.50 become a logical place to park a protective stop.
Becton, Dickinson and Co.
We're seeing the exact same price setup in shares of $39 billion medical supply stock Becton, Dickinson and Co. (BDX - Get Report) --albeit in the shorter-term. Becton has been charging higher year-to-date, up almost 11% on a price basis since the beginning of the calendar year. And now, an ascending triangle points to more upside ahead.
For BDX, the breakout level to watch for is $185. The $185 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 $185 so significant--the move means that buyers are finally strong enough to absorb all of the excess supply above that price level.
Relative strength is the side-indicator that's adding some extra confidence to upside in Becton. This stock's relative strength line has been in a well-defined uptrend since the beginning of January, an indication that the outperformance that's propelled BDX higher in the last couple of months is still holding up today. When shares manage to move through $185, it's time to pull the trigger on this trade.
Texas Instruments Inc.
Meanwhile, things are looking pretty straightforward in shares of $81 billion semiconductor stock Texas Instruments Inc. (TXN - Get Report) . Since last spring, this chipmaker has been making its way higher in a well-defined uptrending channel. In short, it's been a "buy the dips stock" for the past 12 months now--and shares are holding onto their uptrend this April.
The uptrend in Texas Instruments is formed by a pair of parallel trendlines that have done a good job of corralling this stock's price action, particularly its downside, since last May. Betting on a rebound off of support has been a high-probability trade over that entire stretch, and that makes the next bounce higher another tradable signal.
Actually 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, invalidating the upside trade). Remember, all trend lines do eventually break, but by actually waiting for the bounce to happen first, you're ensuring Texas Instruments can actually still catch a bid along that line before you put your money on shares.
Anadarko Petroleum Corp.
Last on our list of large-caps with breakout potential is Anadarko Petroleum Corp. (APC) . Anadarko has been under pressure in recent months, shedding about 11% of its market value since peaking in December. That's the bad news. The good news is that APC is looking "bottomy" in April--and shares could be on the verge of breakout territory from here ...
Anadarko Petroleum is forming an inverse head and shoulders pattern, a bullish reversal setup that indicates exhaustion among sellers. The pattern is formed by two swing lows that bottom out at approximately the same level (the shoulders), separated by a lower low (the head). The buy signal comes on a move through APC's neckline at $64.
Price momentum, measured by 14-day RSI, is the side-indicator to look at in Anadarko. Our momentum gauge has made a series of higher lows during this stock's inverse head and shoulders setup, a bullish divergence that indicates buyers are stepping in behind the scenes. Still, price is primary--wait for APC to push through $64 before you buy it. This stock is within grabbing distance of that key level following yesterday's close.