Many traders like to monitor an entire sector whenever possible and to spot strength in an individual name so that they can attempt to predict the direction of the group's upcoming move. Most institutions trade in baskets to diversify; as a result, many stocks will move in based on the strength of a few. It is also important to see how a stock is trading against its peers to evaluate the leaders in a sector. One group that has caught the attention of traders is the asset management sector.
Tutorial: Basics Of Technical Analysis
Evercore Partners Inc Class A C (NYSE:EVR ) is the stock that sparked interest in asset manager stocks. EVR recently broke out of a base and has been consolidating in a tight range above that base. This is one of the best trading setups, as a stock will typically pause after a breakout, allowing a trader to enter the trade with minimal risk. Of course, this setup is dependent on the stock resuming its strength, so traders should watch the recent range closely to see if EVR attempts a breakout above $37. (For more, see Four Stocks Challenging For A Breakout.)
After spotting EVR, it didn't take long to recognize that many charts in the sector were similar, although they hadn't broken out of their bases yet. Ameriprise Financial (NYSE:AMP ), for instance, has been consolidating since February as it works off some of the buying pressure from last year's rally. AMP has been narrowing in range and should be close to emerging from the triangle pattern it has been following. Traders should keep a close eye on the trendlines it has been following as well as its February high near $65.
Franklin Resources (NYSE: BEN ) is another stock in this sector that is in the midst of consolidating a prior rally. BEN has also recently narrowed in range as it has been stuck between its 50-day moving average near $124 and the top of its base near $130. Traders should keep a close eye on the $130 level; a breakout above this level would project to a target near $150.
Brookfield Asset Management (NYSE: BAM ) is another asset management company traders should keep a close eye on. BAM attempted a breakout in late April but quickly reversed. It pulled back to the middle of its base and its 50-day moving average. However, it found support and is back to testing the top of the range. Any close above the trendline near $33.50 - or more important above $34 - should be watched closely. (For more, see Channeling: Charting A Path To Success.)
The Bottom Line
Much of the this group's success will be directly tied to the behavior of the general markets, but in either case, the stocks will likely trade in unison. Right now, EVR is the stock to watch, as a breakdown will likely reveal weakness in the group and the trickle-down effect might makes its peers less likely to clear their bases. However, if EVR can follow through, this move would likely spill over to its peers and lead to breakouts for them as well.
Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!
At the time of writing, Joey Fundora did not own shares in any of the companies mentioned in this article.