Trading rapidly rising markets can be a difficult proposition: Nobody wants to miss the boat on a rally, but nobody wants to top-tick the move and be left holding the bag, either.
It’s at times like these when scanning the charts can reveal some potentially interesting opportunities to play both sides of the market. And right now, there are a more than a few stocks that offer interesting technical setups.
Several of these can be found in the consumer staples sector. The staples group has been the hottest area of the market in the recent rally, but a handful of stocks are still sitting just short of new highs. With so many names in the group having gone vertical in the past few weeks, these relative laggards could catch a bid if the rally in the broader market continues.
Two consumer staples giants in this position are Coca-Cola (NYSE:KO) and Philip Morris International (NYSE:PM), both of which are shown below. Other staples names that warrant additional investigation include Beam (NYSE:BEAM), Perrigo (NASDAQ:PRGO), and O’Reilly Automotive (NASDAQ:ORLY).
The financial sector is another group where the majority of the charts that are moving upward and to the right at 45-degree angles. Still, two stocks that have been attempting to get through resistance for a half-year are again very close to breakout points: PNC Financial (NYSE:PNC) and Simon Property Group (NYSE:SPG). Both charts indicate that these stocks could be a source of beta in the weeks ahead if financials can continue their run.
The defense sector is home to similar opportunities. Northrop Grumman (NYSE:NOC) is closing in on the $71-$72 that has served as resistance during the past three years, while Raytheon (NYSE:RTN) is a few percentage points away from a four-year high. A positive indication for these stocks comes from Lockheed Martin (NYSE:LMT), which moved out to a new 52-week high on Thursday.
In technology, meanwhile, traders should take a look at Qualcomm (NASDAQ:QCOM), which is on the cusp of an all-time high. On previous occasions, the stock’s move into new high ground (2005, 2008 and early 2012) have been followed by additional gains in the 10%-20% range.
Not all of the charts in this market are as bullish as the seven shown above. In the commodities and mining-related sectors, which have thoroughly failed to participate in the rally in the headline indices, it’s possible to find a number of charts that are on the verge of breaking down — indicating that these stocks could be a source of added return on the short side if the market suddenly turns south.
Most notably, three major commodity ETFs are in danger of a breakdown: PowerShares DB Agriculture Fund (NYSE:DBA), which closed less than a percentage point from its 52-week low on Thursday, as well as SPDR Gold Trust (NYSE:GLD) and iShares Silver Trust (NYSE:SLV), both of which are moving inexorably to their previous support levels.
The downtrend in these ETFs is reflected in several commodity-related stocks: Kinross Gold (NYSE:KGC), Goldcorp (NYSE:GG), Freeport-McMoRan Copper & Gold (NYSE:FCX) and Sterlite Industries (NYSE:SLT). Only Freeport’s chart is shown below, but the story is the same for all four: the stocks are hanging just above support in groups where many of their industry peers have already experienced breakdowns.
Finally, a number of energy stocks are worth a look for a trade in April — one that’s on the verge of breaking out and several that isn’t looking quite so healthy.
The first is Oil States International (NYSE:OIS), which is making its fourth attempt at surmounting the $85-$87 level. The stock still has a way to go — it closed last week at $81.57 — but given its single-digit P/E and strong chart, this one deserves a spot on traders’ watch list.
On the other end of the spectrum, coal stocks have round-tripped from their fourth-quarter rally and are at or near their previous lows. Peabody Energy (NYSE:BTU), Arch Coal (NYSE:ACI), Yanzhou Coal Mining (NYSE:YZC) Walter Energy (NYSE:WLT) are among the coal stocks that are in jeopardy of breaking down. And in all cases, the most recent support beneath the 52-week low is at least four years old, indicating that these stocks are in a very dangerous place even after their horrid first-quarter performance.
As of this writing, Daniel Putnam did not hold a position in any of the aforementioned securities.