Tickers in this Article: BAX
Given the recent weakness in the markets, it has become an increasingly difficult task to find a stock that has been able to move above nearby levels of resistance. However, one company that has been able to keep above water while others drifted lower is Baxter International (NYSE:BAX). As you can see from the chart below, the price was pushed above the May high of $63.39, which suggests that bulls are in control of the direction and that the stock is a candidate for a move higher. The recent increase in volume will be used as technical confirmation that buyers are gaining confidence in the rally and many bullish traders will likely set their stop losses below the nearby trendline to ensure they are able to get out of a position quickly in case of a pullback. To learn more, see The Anatomy Of Trading Breakouts.
We've also added the Relative Strength Index, which is a common indicator used by traders to determine if a certain asset is overbought or oversold. Readings above 70 are generally regarded as overbought, while readings below 30 are deemed to be oversold. In this case, the reading of 67 suggests that the stock is being accumulated, but it still has some room to move before entering overbought territory. Generally, many technical traders will hold onto a position until the indicator crosses below 70 because many of the sharpest price increases occur when the RSI reading is overbought. Using a cross below 70 to generate a sell signal can be one of the best ways for a short-term trader to profit from the rally while giving the trader a relatively accurate signal of when the trend will be exhausted.