| Tickers in this article: AAPL, MSFT, WFC, PFE Call it a triangle, pennant or just a consolidation, the S&P 500 index is moving in a narrowing range after the late-August sell off and looking to breakout. Similar patterns and situations can be found in many stocks; here are four big name stocks worth watching in anticipation of another volatile move.
Apple Inc. (AAPL) 
Apple Inc. (AAPL) sold off to a low of $92 on August 24, but since then has rallied and is getting compressed against short-term resistance near $114.50. Between September 1 and 11 the price is in a narrowing range resembling a pennant formation or small triangle. A breakout above the high at $114.53 indicates there could be more upside, with a target of $121 to $124. That target area is the site of a former long-term support area which could now act as resistance. Triangle support is a rising trendline which is broken if the price falls below the September 9 low of $109.77. That breakout could signal a move back to the $94 to $92 region.
Microsoft Corporation (MSFT) 
Microsoft Corporation (MSFT) hit a low of $39.72 on August 24, which is in line with support from February through April. The low the price has been bouncing off a rising trendline currently intersecting at $42.94. A drop below that signals a decline and a drop back to the $39.72 region. From a long-term perspective a continued decline below $39.72 is bearish as it also breaks a large price range the stock has been in since late 2014. The price target for that long-term downside breakout is $30. On the flip side, a rally above the September 9 high of $44.40 signals a price target of $47. That would erase the major selling which took place in late-August, but $47 through $50 has been stiff resistance for the last 10 months.
Wells Fargo & Company (WFC) 
Wells Fargo & Company (WFC) is moving in a messy consolidation during September, after hitting a 2015 low of $47.75. A break higher out of the consolidation is signaled by a move above $53.7, the September 9 high. That could push the price to $57, but expect resistance there as many who have held their shares through the volatility will be eager to dump them near that level after the rollercoaster ride. A break to the downside is not as clearly defined. One potential short entry is a drop below the September 10 low at $51.8. If the price does continue lower the initial target on the trade is the area of the recent low near $48.
Pfizer Inc. (PFE) 
Pfizer Inc. (PFE) traded to a 52-week high of $36.46 on July 31, before sinking to a low of $28.47 on August 24. Since August 27 the price is contained within a range, with a high at $33.62 and the low at $31.13. A drop below $31.13 breaks the range and signals a likely decline. The nearest target is the $28.47 low, which aligns with the $27.50 to $29 support zone from 2014. A rally above the September 9 high at $33.03 is the first bullish sign, while a rally above $33.62 is the next. $35 is a reasonable upside target, but given the recent turmoil if the price approaches that level many traders who held through the decline will be eager to dump their shares and get out after having their nerve tested. That will likely provide resistance in that area.
The Bottom Line In this sort of environment traders have seen extreme volatility followed by lower volatility (but still high) where the price consolidates. Everyone is waiting for the next move, edgy and ready to buy or sell. While false breakouts occur under the best of circumstances, these types of conditions are especially susceptible to them. There are no guarantees a move beyond a short-term breakout level will trigger a big move, or that the move will sustain itself. Trading in volatility isn't for everyone, as big moves occur quickly and change direction quickly. Right now these stocks--and the entire S&P 500 index--looks poised for another aggressive move. Before any trade consider the pros and cons, the amount you are willing to risk relative to the calculated profit potential, and only then decide if the trade is actually worth taking.
Refine Your Financial Vocabulary Sign up to receive our FREE Term of the Day newsletter. Gain a better understanding all things financial with technical and easy-to-understand explanations. Click here to begin developing your financial language with this daily newsletter. Disclosure - At the time of writing, the author did not own shares of any company mentioned in this article.
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