All day I scan the charts looking for technical patterns to trade, both to the long and short sides. My Trending 123 Pattern Scan powered by Recognia is one useful tool I have to scan the markets quickly, and it is showing two technical events in these financial stocks for traders to take advantage of.
Buy the Continuation Wedge
Click to EnlargeING Groep, N.V. (NYSE:ING) is a global financial services company that offers banking, investing and insurance services. Its stock has developed a bullish continuation wedge over the past 48 days.
After a temporary interruption, the prior uptrend is set to continue. A continuation wedge represents a temporary interruption to an uptrend, taking the shape of two converging trendlines both slanted downward against the trend. During this time the bears attempt to win over the bulls, but in the end the bulls triumph as the break above the upper trendline signals a continuation of the prior uptrend. Volume should diminish as the pattern forms.
You can also check that the prices following the pattern have crossed above a resistance level such as the 200 day moving average. This would provide extra confirmation that the trend is poised to continue upward.
Recommendation: Buy ING for a $10.30 – $10.90 target, with a $7.13 stop.
Short the Head and Shoulders Top
Union First Market Bankshares Corp. (NASDAQ:UBSH) is a bank holding company that offers financial services in Virginia. Its stock has developed a head and shoulders pattern over the past 23 days.
The price seems to have reached the end of a period of “distribution” at the top of a major uptrend; the break down through support signals a reversal to a new downtrend. The head and shoulders top is created by three successive rallies in the price following a significant uptrend. The highest high (head) is in the middle, flanked by two lower highs (shoulders) at roughly the same level.
Volume is highest as the price makes the first two rallies, then diminishes through the right shoulder. Finally volume surges as the price closes below the neckline (drawn between the two lows) to confirm the reversal.
Recommendation: Short UBSH for a $17.85 – $18.05 target, with a $19.68 stop.
InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the Open, Parabolic Options and Trending123. For more information on which service is for you click here.