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Stock trading ideas from the charts

Technical screens revealing opportunities in social media, biopharma, and more.

  • Active Trader News
  • – 04/11/2014
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Don’t be fooled by the fanciful names of some expert technical screens—like “Falling Stars” and “Phoenix Rising.” Several such screens found on Fidelity.com (provided by Recognia) can help you filter and identify candidates to buy or sell quickly and easily, based on widely used technical trading patterns.

Searching through individual stock charts to find technical patterns is generally faster than doing fundamental analysis, but it still requires some time and expertise. The Fidelity stock screener is powerful enough to find technical patterns and generate ideas for you—right away—based on a variety of preset criteria.

Here are just a few of the latest findings from some of our more popular technical screens.

Head and Shoulders Above the Rest: reversal stocks

One of the most well known chart patterns is “head and shoulders.” The bullish version of this pattern is the head and shoulders bottom; the shape of this pattern on a chart resembles the letter “M”. Conversely, the head and shoulders top is a bearish pattern, resembling the letter “W”. The “Head and Shoulders Above the Rest” screen attempts to find stocks with sound fundamentals that are also exhibiting the head and shoulders bottom pattern.

As of April 11, 2014, the top results of this screen include:

  • Real estate manager Annaly Capital Management (NLY).
  • Transportation and logistics company C.H. Robinson Worldwide (CHRW).
  • Food processing firm BRF (BRFS).

Phoenix Rising: oversold stocks

Another bullish expert screen is the “Phoenix Rising.” This screen filters for oversold stocks that are also showing signs of a technical reversal. The Phoenix Rising looks for stocks that are undervalued relative to their 50-day price moving average and where the trend of volume has begun to expand.

As of April 11, 2014, the top results of this screen include:

  • Social media company Facebook (FB).
  • Life science tools developer Illumina (ILMN).
  • Biopharma firm Regeneron Pharmaceuticals (REGN).

Growing on Trees: bullish short-term momentum

A third screen that combines technical and fundamental analysis is the “Growing on Trees” screen. The objective of this strategy is to find financially sound stocks—using popular fundamental ratios such as return on equity and price to sales—that have also exhibited bullish short-term momentum.

The top results of this screen, as of April 11, 2014, include:

  • Energy company Energy Transfer Equity (ETE).
  • Professional services firm Aecom Technology (ACM).
  • Semiconductor image-sensor device manufacturer OmniVision Technologies (OVTI).

Falling Stars: fundamentally overpriced

Of course, trading isn’t just about stocks on the way up. There are a number of opportunities for investors who think certain stocks might decline. The “Falling Stars” screen looks for short opportunities among companies that may be fundamentally overpriced and that have recently experienced a strong advance—which could result in a correction.

As of April 11, 2014, the top results of this screen include:

  • Aerospace engineering company LMI Aerospace (LMIA).
  • Lifting solutions producer Manitex International (MNTX).
  • Aerospace and defense products manufacturer Gencorp (GY).

Bears in the Woods: bearish technical patterns

Another technical screen for bearish investors is the appropriately named “Bears in the Woods” expert strategy. This screen attempts to find companies that have extended fundamental price ratios, a history of higher than average volatility, and recent bearish short-term technical patterns.

As of April 11, 2014, the top results of this screen include:

  • Oil company YPF SA (YPF).
  • Oil services provider Weatherford International (WFT).
  • Steel producer United States Steel (X).

The power of the chart

Within the context of a broader investing or trading strategy, technical patterns can provide a number of opportunities. But beware of the possibility that a chart pattern may not result in the price move that you expect.

Always consider looking for supporting evidence—in addition to that discovered by the screen. With the results of the screen in hand, you may want to look at what other technical indicators (i.e., MACD, RSI, moving averages, etc.) may be suggesting about the price action. Also, it can help greatly to have a sense of what the broad market is doing, as well as a specific stock’s sector/industry and, of course, its fundamentals. Use these stars, trees, bears, heads and shoulders, and the phoenix wisely.

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Past performance is no guarantee of future results.
Technical analysis focuses on market action—specifically, volume and price. Technical analysis is only one approach to analyzing stocks. When considering which stocks to buy or sell, you should use the approach that you’re most comfortable with. As with all your investments, you must make your own determination as to whether an investment in any particular security or securities is right for you based on your investment objectives, risk tolerance, and financial situation. Past performance is no guarantee of future results.
Stock markets are volatile and can fluctuate significantly in response to company, industry, political, regulatory, market, or economic developments. Investing in stock involves risks, including the loss of principal.
The Fidelity [Stock, Preferred Security, ETF/ETP and Closed End Fund] Screeners (Screener(s)) [is a ] [are] research tools provided to help self-directed investors evaluate these types of securities. The criteria and inputs entered are at the sole discretion of the user, and all screens or strategies with pre-selected criteria (including expert ones) are solely for the convenience of the user. Expert Screens are provided by independent companies not affiliated with Fidelity. Information supplied or obtained from these Screeners is for informational purposes only and should not be considered investment advice or guidance, an offer of or a solicitation of an offer to buy or sell securities, or a recommendation or endorsement by Fidelity of any security or investment strategy. Fidelity does not endorse or adopt any particular investment strategy or approach to screening or evaluating stocks, preferred securities, exchange traded products or closed end funds. Fidelity makes no guarantees that information supplied is accurate, complete, or timely, and does not provide any warranties regarding results obtained from their use. Determine which securities are right for you based on your investment objectives, risk tolerance, financial situation and other individual factors and re-evaluate them on a periodic basis.
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