As the S&P 500 continues its uptrend, these stocks also look poised for another rally. All in uptrends and having experienced a slight pullback, these stocks were consolidating until recently, when the price started moving up again. Swing traders will be looking to capitalize on the next wave higher in the uptrend. These stocks have all been confined to a relatively tight rising channel recently, which means that the trades are likely to be short term, as the price should quickly reach the top of the channel/profit target.
Bank of America Corporation (BAC) stock fell toward major support near $22 in June, but since then, the price has been making higher swing highs and higher swing lows. The most recent pullback looks to have ended when the stock jumped 2.38% on July 25. The short-term rising channel indicates that the next move up will test the vicinity of the March high ($25.80). A stop-loss could be placed near $23.55. Based on the July 25 close of $24.48, that leaves about $1.32 of short-term upside potential versus about $0.93 of downside risk. That risk/reward isn't great, but it could be improved by waiting for a slightly lower entry point or holding the trade for a higher target price (don't let a winning trade turn into a loser if the price fails to move materially above the $25.80 region). (See also: Bank of America Profit Rises as Consumer Bank Hits Profit 'Milestone'.)
Shares of The Allstate Corporation (ALL) have been charging higher since late 2016. Pullbacks have been shallow, so traders have had to be aggressive if they want in. In late June, the price started consolidating, and that consolidation remained intact until July 19. On that day, the bias shifted back to the upside. With the uptrend so strong, traders should look to enter near the breakout point between $90 and $89.25. Stop-losses could go below $87.60. An estimated upside target based on the rising channel is $92.40, although the price has had a tendency to move beyond the channel high, so a target of $93.40 is still reasonable. (For more, see: Allstate Announces May Cat Loss, Weather Woes Linger.)
Globus Medical, Inc. (GMED) stock had a short but swift decline at the start of July, followed by a consolidation. The price has been attempting to break out of the consolidation since July 17, and the strong surge higher on July 25 helped confirm the breakout. This signals that another wave up, in alignment with the long-term uptrend, could be commencing. Throughout the year, when the price has broken higher out of a consolidation, it has typically moved up by 8% or more. That puts an estimated profit target just above $35. A stop-loss could be placed below $31.50. The risk/reward can be improved by trying to obtain an entry price between $32.65 and $32.50 (slightly better than the July 25 close of $33.10). (See also: Investing in Medical Equipment Companies.)
The Bottom Line
These stocks are setting up for short-term swing trades. The profit targets are based off technical patterns that have been repeating throughout the year. These trades will likely end up lasting a few days to a few weeks. One thing to keep an eye out for is earnings. Allstate and Globus Medical report on Aug. 1 and Aug. 2, respectively. Short-term swing traders may wish to exit trades before earnings, as the other option is holding through some potentially volatile price moves. If there is a surprise in those earnings announcements, the price could blow through the target or stop-loss levels. Traders should risk only a small percentage of account capital on any single stock trade. (For related reading, check out: The Daily Routine of a Swing Trader.)
Charts courtesy of StockCharts.com. Disclosure: The author does not have positions in the stocks mentioned.