Long-term investors may not like volatility, but traders know that market swings create opportunities to capitalize on stocks that are sitting at key technical levels.
Such stocks aren’t necessarily just trading vehicles, however: in some cases they can also act as an early warning of what the broader market may do next. Savvy traders know to watch these charts closely to inform the decisions they make with other stocks.
With that in mind, here are nine stocks whose charts you should be watching right now:
Vanguard FTSE Developed Markets ETF (VEA)
Click to EnlargeThe first of our stock charts is Vanguard FTSE Developed Markets ETF (VEA), which — as its name suggests — invests globally but avoids the emerging markets.
The ETF is sitting just below the $42 – $42.30 level that has acted as resistance on numerous occasions in the past four months. A sustained break above this level would signal an all-clear for the markets and indicate that the Sell-in-May mantra might not necessarily work in 2014.
But at the same time, the ETF is just a few percentage points away from its 200-day moving average and lower trendline. The direction VEA ultimately breaks could go a long way toward telling traders what may happen next.
iShares MSCI Europe Financials ETF (EUFN)
Click to EnlargeAlong that same line, the iShares MSCI Europe Financials ETF (EUFN) stock chart is also exhibiting defined support ($24.50) and resistance ($26.10) points.
This is a fairly obscure ETF, but it matters. EUFN was ground zero for the European crisis in 2011 and 2012, and its recovery in 2013 accompanied the rebound in Europe’s economy from recession to modest growth. EUFN’s price action around these key levels will be an important signal of whether Europe is indeed back on track, or whether the recent decline in the region’s inflation portends something more ominous.
SPDR S&P Retail ETF (XRT)
Click to EnlargeThe retail sector is also worth watching right now due to its potentially precarious technical position.
The SPDR S&P Retail ETF (XRT) has put in a series of lower lows, and it has moved under its 200-day moving average. More ominously, it is sitting right above an established three-year trendline, meaning that it won’t take much in terms of a broader-market selloff to push XRT into breakdown territory.
Click to EnlargeIn terms of individual stock charts to watch in retail, Lowe’s (LOW) looks set to underperform if the overall sector does in fact break down.
LOW stock has an established support line at $45, and it could be set for another test with the stock in the mid-$46 range. This time, however, it will do so while trading below its 200-day moving average and without the upward momentum that has carried the stock during the past three years. LOW stocks tends to fall quickly once it loses steam, so keep an eye on this one as a potential opportunity from the short side.
Citigroup (C) and Goldman Sachs (GS)
Click to EnlargeThe back-and-forth market action of 2014 has also created some interesting technical set-ups in individual stock charts across a wide range of sectors.
Click to EnlargeIn financials, the Citigroup (C) and Goldman Sachs (GS) charts have formed similar patterns, moving close to long-term support while trading under flattening 200-day moving averages. Both stocks have bounced in the recent rally, but it won’t take much of broader-market downdraft to send these two names under support. Watch $45 for Citigroup and $150 for Goldman Sachs. Under these levels, the year-to-date underperformance of these stocks could evolve into something larger.
Tenet Healthcare (THC)
Click to EnlargeHealth care is also home to a stock chart that signals a potential trading opportunity, and again the most likely move appears to be to the downside. Tenet Healthcare (THC) has multiple hits on its support line at $37, and while it is still $3 away from this level, it is also printing lower highs with a declining 200-day moving average.
THC stock still has a good distance to fall before breaking down, but the weak year-to-date price action in the stock signals that it’s time to put this one on the watch list.
Click to EnlargeFortunately, the news isn’t all bad. The energy sector is also home to stock charts that deserve traders’ attention, but in this case the potential move is to the upside. Energy stocks are in interesting spot here, with the Energy SPDR (XLE) having moved into record territory. ConocoPhillips (COP) and Southwestern Energy (SWN) are in the best position to outperform on a potential breakout in the sector.
Like XLE, ConocoPhillips surpassed its high of late 2013 on Thursday, which also puts it above its high of 2008. While Conoco isn’t usually thought of as a fast mover, its reasonable valuation and 3.7% dividend yield provides latitude for upside above $75.
Southwestern Energy (SWN)
Click to EnlargeSouthwestern is also in line for an important breakout if it can break through the $50-51 range that served as resistance on three occasions in 2008-2011.
And, unlike COP, it tends to be fairly volatile — meaning that it can provide some beta if the broader sector continues to move higher.
As of this writing, Daniel Putnam did not hold a position in any of the aforementioned securities.