The Top 10 Stock Charts to Watch in October

by Daniel Putnam | September 30, 2013 9:22 am

The Top 10 Stock Charts to Watch in October

Discerning the market’s likely direction in October is even more of a challenge than usual, since political wrangling in Washington is sure to represent a major source of headline risk. When this type of uncertainty looms over the market, traders often pore over stock charts, searching for stocks that are stuck in a channel — meaning they can provide opportunities no matter which way the market moves.

Four stocks are in just such a position as we move into October: Canadian National Railway (CNI[1]), Dick’s Sporting Goods (DKS[2]), Foot Locker (FL[3]) and eBay (EBAY[4]).

01 The Top 10 Stock Charts to Watch in October[5]

02 The Top 10 Stock Charts to Watch in October[6]

03 The Top 10 Stock Charts to Watch in October[7]

04 The Top 10 Stock Charts to Watch in October[8]

Among the four stock charts, Dick’s appears to be the one most likely to break out to the upside. Not only is it the closest to its breakout point — finishing Friday within just 1.4% of its 52-week high — but it also has two other factors working in its favor:

  1. DKS has seen a clear uptick in trading volume in the past month.
  2. It has plenty of room to rise before it reaches its maximum P/E ratio of the past year.

Earnings dates for the four stocks are as follows: eBay, Oct. 16; CNI, Oct. 22; Dick’s and Foot Locker, Nov. 11.

Put Exxon, Yum Brands on Your Watch List

Two other stock charts bear watching in the month ahead. The first is Exxon Mobil (XOM[9]), which — as we highlighted last month[10] — has crossed below both its 200-day moving average and its longer-term trendline. The stock is now approaching the $85 mark — a level that has served as support on three different occasions in the past year.

Even if XOM falls through this level, it’s unlikely that the resulting breakdown would lead to serious downside for a stock with such a large market capitalization. Rather than considering a break below $85, use it as an indication that the stock could be dead money for a while despite its rock-bottom valuation.

05 The Top 10 Stock Charts to Watch in October[11]

To gauge whether any breakdown in Exxon Mobil has any broader implications for the energy sector, look for a confirmation in BP (BP[12]), which has support just below $40, and the Energy SPDR (XLE[13]), which closed Friday 4.5% above its one-year lower trendline.

06 The Top 10 Stock Charts to Watch in October[14]

07 The Top 10 Stock Charts to Watch in October[15]

The fact that Yum Brands (YUM[16]) is just short of its $75 resistance level should come as no surprise to technicians — this breakout point has been amply covered on InvestorPlace[17] and elsewhere in the financial media. Still, that level of attention is reason enough to keep an eye on Yum: With so many traders anticipating a breakout for months now, a move above $75 is sure to be accompanied by meaningful short-term upside. Yum reports on Tuesday.

08 The Top 10 Stock Charts to Watch in October[18]

Taking the Pulse of the Global Economy

The final stock charts to watch in the month ahead are not specific trading opportunities, but rather a barometer of the world economy. The narrative underlying the stock market’s third-quarter strength is that global growth is primed for an upswing, with the United States continuing to gain momentum, Europe set to emerge from a recession, and the odds of a hard landing in China beginning to drop.

If that’s truly the case, it’s tough to tell by looking at the commodity markets. A look at PowerShares DB Commodity Index Tracking Fund (DBC[19]) and PowerShares DB Base Metals Fund (DBB[20]) show that these two funds haven’t been able to gain any traction in the past three months despite the talk of improving global growth. If these two ETFs can break above their resistance lines, it will give some credence to idea of an improving world economy. Until that time, however, be careful not to put too much stock in discussions of a broad-based world recovery.

09 The Top 10 Stock Charts to Watch in October[21]

10 The Top 10 Stock Charts to Watch in October[22]

Maybe the Fed knew what it was doing after all when it decided not to taper.

As of this writing, Daniel Putnam did not hold a position in any of the aforementioned securities.

Endnotes:
  1. CNI: http://studio-5.financialcontent.com/investplace/quote?Symbol=CNI
  2. DKS: http://studio-5.financialcontent.com/investplace/quote?Symbol=DKS
  3. FL: http://studio-5.financialcontent.com/investplace/quote?Symbol=FL
  4. EBAY: http://studio-5.financialcontent.com/investplace/quote?Symbol=EBAY
  5. [Image]: http://investorplace.com/wp-content/uploads/2013/09/01.jpg
  6. [Image]: http://investorplace.com/wp-content/uploads/2013/09/02.jpg
  7. [Image]: http://investorplace.com/wp-content/uploads/2013/09/03.jpg
  8. [Image]: http://investorplace.com/wp-content/uploads/2013/09/04.jpg
  9. XOM: http://studio-5.financialcontent.com/investplace/quote?Symbol=XOM
  10. last month: http://investorplace.com/2013/08/three-blue-chips-where-the-charts-are-screaming-sell/
  11. [Image]: http://investorplace.com/wp-content/uploads/2013/09/05.jpg
  12. BP: http://studio-5.financialcontent.com/investplace/quote?Symbol=BP
  13. XLE: http://studio-5.financialcontent.com/investplace/quote?Symbol=XLE
  14. [Image]: http://investorplace.com/wp-content/uploads/2013/09/06.jpg
  15. [Image]: http://investorplace.com/wp-content/uploads/2013/09/07.jpg
  16. YUM: http://studio-5.financialcontent.com/investplace/quote?Symbol=YUM
  17. covered on InvestorPlace: http://investorplace.com/2013/07/trade-of-the-day-yum-brands-yum/
  18. [Image]: http://investorplace.com/wp-content/uploads/2013/09/08.jpg
  19. DBC: http://studio-5.financialcontent.com/investplace/quote?Symbol=DBC
  20. DBB: http://studio-5.financialcontent.com/investplace/quote?Symbol=DBB
  21. [Image]: http://investorplace.com/wp-content/uploads/2013/09/09.jpg
  22. [Image]: http://investorplace.com/wp-content/uploads/2013/09/10.jpg

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