Given the market's recent weakness, it has become an increasingly difficult task to find stocks that are positioned to make a move higher. As many of you know, it can be hard to feel confident about a certain entry level when the market is in a slump. The trick is to only take a position in a stock that is near an established level of support, to minimize the risk of taking a major loss. This is undoubtedly easier said than done, but let's examine three companies that are nearing support levels and could be candidates for some short-term buying pressure.

VeriSign Inc. (Nasdaq:VRSN) - Taking a look at the daily chart of VRSN, you'll notice that it has been pushed dramatically lower since the beginning of the week. The recent weakness may cause many traders to remain on the sidelines, but for others, it could provide an interesting buying opportunity. As you can see from the chart below, which includes the Relative Strength Index, the RSI crossed above the 30 level today. In general, readings below 30 suggest that the stock is oversold and a cross above this level is often used as a buy sign. The nearby trendline strengthens the RSI buy signal because it has been able to prevent the stock from being pushed lower in the past. Many bullish traders will likely protect themselves from further weakness by setting a stop-loss order below the nearby support level because it offers an interesting risk/reward ratio.

Carrizo Oil & Gas Inc. (Nasdaq:CRZO) - CRZO is another company that is nearing an influential level of support. As you can see from the chart below, the 200-day moving average (pink line) has been able to prop up the price since early 2007. This chart is a good example of how a move toward a level of support can provide a series of strategic entry levels for technical traders. We've also added the RSI to this chart because the current reading of 28.21 suggests that the stock is oversold and that it could be setting up for another move higher like it has done in the past (shown by the black arrows).

Research In Motion Ltd. (Nasdaq:RIMM) - Taking a look at the daily chart of RIMM, you'll notice that it looks eerily similar to that of CRZO. Notice how the price has moved lower over the past couple of weeks, but has failed to drop below the support of its 200-day moving average (pink line). Some technical traders will use the recent weakness as an opportunity to take a position. These traders will watch for the stock to bounce off the support like it has done in the past (shown by the black arrows). It wouldn't be surprising to see these traders protect their positions by setting stop losses below the nearby moving average because a close below this level will suggest that the trend has reversed and that the longer-term direction will be lower.

Nothing contained in this publication is intended to constitute legal, tax, securities, or investment advice, nor an opinion regarding the appropriateness of any investment, nor a solicitation of any type. The general information contained in this publication should not be acted upon without obtaining specific legal, tax, and investment advice from a licensed professional.
Related Articles
  1. Chart Advisor

    Breakout Opportunity Stocks: CPA, GNRC, WWE

    After a period of contracting volatility, watch for breakouts and bigger moves to come in these stocks.
  2. Chart Advisor

    3 Charts That Suggest Now Is The Time To Invest In Real Estate (VNQ, SPG,PSA)

    Real estate assets have some of the strongest uptrends around. We'll take a look at three candidates poised for a move higher.
  3. Chart Advisor

    Stocks With More Upside Due to Bear Traps (TAP, SPY)

    A bear trap is a pattern that typically leads to at least a short-term rise in prices. Here are stocks exhibiting the pattern.
  4. Active Trading Fundamentals

    New Traders: Trade the Market in 5 Steps

    New traders shouldn’t throw money at securities without knowing why prices move. Follow these five steps to tilt the odds in your favor.
  5. Chart Advisor

    Watch For a Bounce in These Emerging Markets (BRF, PEK)

    While downtrends are clearly in control of the direction of many emerging market ETFs, short-term indicators suggest a bounce higher could be in the cards.
  6. Investing Basics

    Valuation Models: Apple’s Stock Analysis With CAPM

    The capital asset pricing model, or the CAPM, estimates the expected return of an asset based on the systematic risk of the asset’s return.
  7. Stock Analysis

    Will "FANG" Stocks Outperform in 2016?

    Facebook held the most bullish accumulation-distribution pattern into year’s end, telling investors to focus on this issue in 2016.
  8. Chart Advisor

    Stocks At Buy Points In Healthy Uptrends

    These stocks are in healthy long-term uptrends, and a recent pullback presents a buying opportunity.
  9. Chart Advisor

    The Uptrend Is Reversing In Financials

    Active traders are turning to financials because the close below several key long-term support levels suggest that the uptrend is about to reverse,
  10. Chart Advisor

    These 3 Charts Suggest Bears Control The Commodity Markets

    Many investors are wondering if they should be betting on a trend reversal in commodities. These charts suggest that a reversal might be further out than many hope.
  1. What is Fibonacci retracement, and where do the ratios that are used come from?

    Fibonacci retracement is a very popular tool among technical traders and is based on the key numbers identified by mathematician ... Read Full Answer >>
  2. What are some of the most common technical indicators that back up Doji patterns?

    The doji candlestick is important enough that Steve Nison devotes an entire chapter to it in his definitive work on candlestick ... Read Full Answer >>
  3. Tame Panic Selling with the Exhausted Selling Model

    The exhausted selling model is a pricing strategy used to identify and trade based off of the price floor of a security. ... Read Full Answer >>
  4. Point and Figure Charting Using Count Analysis

    Count analysis is a means of interpreting point and figure charts to measure vertical price movements. Technical analysts ... Read Full Answer >>
  5. What assumptions are made when conducting a t-test?

    The common assumptions made when doing a t-test include those regarding the scale of measurement, random sampling, normality ... Read Full Answer >>
  6. How are double exponential moving averages applied in technical analysis?

    Double exponential moving averages (DEMAS) are commonly used in technical analysis like any other moving average indicator ... Read Full Answer >>
Trading Center