If you’re tired of government and central bank policy being the most important driver of financial market performance, some good, old-fashioned stock charts ought to be a tonic for your fiscal cliff blues.
As we move into December, 11 charts point to potential opportunities — and they won’t necessarily depend on the latest quotes from John Boehner to provide traders with a little extra bang for their buck. Five are big-name stocks that are close to breaking out to new highs, while six others are resource picks that could be poised to move off bases they have established over the past year.
December Breakout Candidates
If you’re a bull on the broader market, a few select names could deliver outperformance in the months ahead:
Bank of America (NYSE:BAC) Macy’s (NYSE:M) Salesforce.com (NYSE:CRM) Adobe Systems (NASDAQ:ADBE) Stryker (NYSE:SYK).
It’s a diverse group of stocks, but they do share an important common trait: With the exception of Macy’s — which has traded down this week — all of these stocks are just pennies from breaking out to 52-week highs. The charts speak for themselves:
The story with this group of stocks from the energy and materials sectors is less clear-cut since they are trading at a roughly equal distance between downside support and the resistance created by their 200-day moving averages. Traders can therefore look at this group for opportunities in either direction … but stops are essential.
In the materials-related group, Alcoa (NYSE:AA), Caterpillar (NYSE:CAT) and Potash (NYSE:POT) are among those trading just above long-term support but within striking distance of their 200-day moving averages. The proximity to the 200-day is a common trait among many materials stocks right now, as illustrated in the charts of the Market Vectors-Coal ETF (NYSE:KOL) and the Market Vectors-Steel ETF (NYSE:SLX).
Together, all of these stocks are important to watch not just for potential trades, but to see whether support or resistance is broken first. This could provide a key indication of what’s in store for the rest of the market in the months ahead.
Also, the energy sector is home to three charts that signal potential opportunity: Baker Hughes(NYSE:BHI), McDermott International (NYSE:MDR) and Nabors Industries (NYSE:NBR). All three stocks have tested established support and begun to climb higher. And as is the case with the materials stocks mentioned above, all are very close to their 200-day moving averages. What’s more, a look at the two-year charts shows that the upper trendlines aren’t far above the 200s.
Watch these names closely for a trade as we approach year-end, but hold onto long-side trades only as long as crude oil can hold above $80/barrel.