Buy These Stocks on The Pullback Tickers in this article: BMY, FNF, LEN, TOL There are no guarantees a trend channel will continue, but when a stock is trading within one it provides a visual guide as to when to buy and sell. These four stocks are in upward sloping trend channels (uptrends) and have recently pulled back toward the bottom of the rising channel. Since the price has shown a tendency to bounce off the channel bottom, now may be a good time buy. Ideally wait for some bullish confirmation along the bottom of the channel to indicate the price is likely to rise again. Here's how to do it.
Bristol-Myers Squibb Company (BMY) 
Bristol-Myers Squibb Company (BMY) is in an ascending trend channel going back to December. The price tested the channel low on May 29 and June 15, and has since begun to creep higher. The ideal entry is near the trendline which has been respected multiple times, between $66 and $65. A stop loss can be placed below the June low of $64.26, or the May low of $63.16. The top of the channel is ragged (not clearly defined), but by connecting a trendline along as many highs as possible an estimate of where the price could go next (if it goes higher) is attained. Take profits at $70 to $70.25, as this is the estimated top of the channel.
National Financials, Inc. (FNF) 
The trend channel (almost like an ascending triangle in this case) in Fidelity National Financials, Inc. (FNF) goes back to February. The price bounced off the rising trendline in mid-June and has since been pushing higher. Entering near the channel bottom will now require a bit of a pullback (back toward the bottom of the channel). Buy orders are placed between $36.25 and $36.60. Place a stop loss below the June low of $35.89. Connecting the major swing highs since February defines the top of the channel, and provides a profit target near $39.
Lennar Corp. (LEN) 
Lennar Corp. (LEN) has "overrun" its trend channel on a number of occasions, although the chart shows the stock still has a general tendency to bounce off the trendlines. The current channel goes back to November of 2014, and price tested the bottom of the channel in May and June. The price has moved up from the channel bottom, so like Fidelity National, waiting for a small pullback is recommended. The buy zone is between $46.50 and $47, with a stop loss below the June low at $45.78. The approximate top of the channel, and price target, is $52.75. This is below the April high of $53.67 since the rally in April was outside the typical (recent) tendency of the stock, and therefore such a strong run may not occur again. Choosing a more conservative target, that is likely to get hit (resulting in a profit,) is a better play than being too ambitious and setting a target which doesn't get hit.
Toll Brothers Inc. (TOL) 
Toll Brothers Inc. (TOL) is moving within a well defined rising trend channel going back to October, and since May the price has repeatedly tested channel support. Buy between $36.30 and $37 with a stop loss below the May 27 low of $35.63. The top of the channel and potential profit target is $42.25. The longer-term chart shows that the current trend channel is within a larger price range, with strong resistance in the $40 region. Taking profits just below $40 is another option, since waiting for the $42.25 target requires a break out of the longer-term range.
The Bottom Line Trend channels are a useful trading tool because they provide visual clues as to when and where to entry and exit a stock (or other asset). In an upward sloping trend channel, buy near the bottom of the channel with a profit target near the top of the channel. A stop loss order can be placed below the channel or below a recent swing low in close proximity. Ideally wait for the price stop falling near the channel bottom and start to creep higher before buying. This helps to confirm the trend channel is still holding; even with waiting for this confirmation the entry price should still be quite close to the bottom of the channel.
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