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Four Stocks that Could Save Your Portfolio


Ignoring signals of these big-cap favorites could leave you treading water.

Last year's tsunami that decimated investors was seen by very few. Just as courteous in its turnaround, Mr. Market failed to announce that it was going to engage in a monster run-off of the March 2009 lows. And of course, the now infamous failed head-and-shoulders didn't send out invitations to partake in the additional 10% upside move.

Fundamentalists debate the merit of certain economic numbers: Was a 1% drop in GDP actually a good sign when 1.5% was expected? Technicians posit whether last week's lighter gains were a mere pause in the action, or a subtle hint to keep your powder dry. Theories and opinions swirl like those gale force winds of last fall.

Underneath it all, I believe there are 4 key stocks traders can watch closely to determine the true health of the market. I want to examine each stock from a technical viewpoint, and show you why each continues to improve day in and day out. Ignoring the signals of these big-cap favorites might leave your portfolio treading water. On the flip side, when these stocks falter, then we can start to discuss the potential for another reversal, however getting too negative before they show signs of key reversals is a very dangerous game to play.

Bank of America (BAC)

From a 52-week high of $39.50, Bank of America swooned to a March 2009 low of $2.53. It's now up over 480% since then. The company was able to pull off one of the biggest secondary financing issues ever seen, and on the weekly chart, traders can see a solid base being built off of the lows.

The base of the last 2-3 months gives traders a great place to observe a logical stop should someone desire to go long. While there may be resistance as Bank of America bumps into the overhead 50-period moving average, it will be important to study the character here and how it handles this level. In addition to the next beast I'll discuss, Bank of America has been leading the financials. This has, in turn, been the pulse behind the recent rally. Should this name start giving back critical levels, then we can turn bearish. Until then, Bank of America is telling us the market has improved dramatically.

Goldman Sachs (GS)

Goldman has shown uncanny strength since its November 2008 low of $47.41, and it hasn't looked back. When the broad markets were hitting fresh new lows in March 2009, Goldman was tracing a very bullish third intermediate higher low. Currently up 240% off of those November lows, it's already trading above its 50-period moving average on the weekly chart. Many stocks have yet to retake this important line, and this speaks volumes as to the strength of Goldman. A healthy multi-week base was put in the $135-140 area, and it looks as though a higher base might be forming at $160.

Another technical signal for Goldman is the year-long cup-and-handle formation, with the breakout coming at $151.17. The next likely area of resistance will be around $180. Similar to the market in general, Goldman Sachs is clearly extended in the short term, however it's far from technically bearish.

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No positions in stocks mentioned.

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