5 Bottoming Stocks Starting to Signal a Buy
BALTIMORE ( Stockpickr) -- Mr. Market is starting to consolidate this morning, correcting after rallying hard for all but a handful of days in 2013.
While it may not seem like it at first glance, a measured pullback is hugely constructive for a longer-term stock rally. It gives investors a chance to catch their breath after such a big move this month before giving it another go. More important, it gives investors a nicer entry point for piling onto their equity positions; after all, you can't "buy the dips" in a market where there aren't any dips.
And as far as my analysis is concerned, this is certainly a "buy the dips" kind of market.
Not all stocks have been participating in January's equity rally, and in most cases that's been a red flag worth heeding. But in a select few names, signs of bottoming price action point to stocks that could be making up for lost time in February. Today, we'll take a technical look at five of them.
For the unfamiliar, technical analysis is a way for investors to quantify qualitative factors, such as investor psychology, based on a stock's price action and trends. Once the domain of cloistered trading teams on Wall Street, technicals can help top traders make consistently profitable trades and can aid fundamental investors in better planning their stock execution.
So, without further ado, let's take a look at five technical setups worth trading now.
>>5 Rocket Stock to Buy This Week V.F. Corporation
Up first is apparel name V.F. Corporation (VFC) . This clothing stock has slid close to 9% in the last quarter, a period while the rest of the industry has pushed almost 5% higher. But now, VFC could be getting ready to play catch-up thanks to the pattern that's showing itself in shares.
VFC is currently forming a falling wedge, a price pattern that's formed by downtrending trendlines that are converging. Don't let this pattern's appearance fool you. Even though it looks bearish, it's actually a bullish setup. That convergence is the critical element that separates a falling wedge from a more conventional bearish downtrend. The breakout above downtrend resistance is the buy signal for this stock.
Some bigger names have been showing similar setups lately and have already staged their breakouts higher. If those are any indication of the upside potential in VFC, investors will want to keep a very close eye on resistance right here. It's critical not to be early on this trade by jumping in before that breakout happens. Since VFC is still trending lower, you could be in a losing position before this stock even triggers the buy signal. When it does, though, keep a tight stop at the 200-day moving average . Best Buy