As we head into the second half of 2025, here are three stocks that present strong technical setups with favorable risk/reward profiles. One is the largest market cap stock we’re familiar with, which bodes well for the market in general. The second is an old tech giant that’s making a comeback. The third is a beaten-down S&P 500 name that may be ready to rally.

Let’s dive into these three stocks.

NVIDIA (NVDA) is Leading the Market

Nvidia (NVDA) shares have finally broken out and closed above $150, a level we’ve been closely watching. With price action above that resistance threshold, NVDA’s stock price has room to run.

DeepSeek and tariff concerns seem to be in the rearview mirror. The fundamental positives are continued earnings growth, continued large tech cap-ex spend, and, more recently, Jensen Huang’s unveiling of a cute robot he feels could be the next big thing.

Technically, this move has legs, and we have the patterns and history to show for it. The risk/reward set-up is now quite favorable. Let’s break it down.

Over the last five years, there have been periods of consolidation (green boxes) and then significant breakouts to the upside. In all cases, shares became overbought according to the relative strength index (RSI). But overbought doesn’t mean NVDA’s stock price will reverse. During uptrends, overbought conditions can last for quite some time, as they did after the prior two significant breakouts.

With the official breakout above $150 and RSI again reading over 70, history suggests an extended rally is in the cards. A gain of 25–30% from current levels and a run to $200 is likely.

The downside risk is to the $150 level, from which shares just broke out. If this move is just a head fake, then use that level as a stop to limit your losses. This risk/reward set-up is why we believe this is one to own for the back half of 2025.

Cisco Systems (CSCO) Finds New Life

Old-timers like me may remember what a high flyer Cisco Systems (CSCO) once was. It’s been a member of the Dow Jones Industrial Average ($INDU) since June 2009, and shares have struggled to sustain any upward momentum until lately.

Fundamentally, the company continued to grow through acquisition. Now, those deals are starting to help their bottom line, namely the $28 billion acquisition of Splunk that closed in 2024. 

Technically — and that’s what we care about on the StockCharts platform — we can have some fun.

Below is a 30-year chart going back to the dot-com boom. Cisco was one of Wall Street’s darlings and climbed astronomically before falling from the skies. It has struggled to revisit those levels, but that could change soon. 

Switching to a smaller time frame — a three-year weekly chart (see below) — we are seeing great set-ups as we head into the back half of 2025.

CSCO’s stock price consolidated between $43 and $55 for 15 months and broke out in late 2024. Shares rallied and then pulled back to old resistance (now support) at $55 and began their climb back.

Now shares are breaking out again. An upside target of $82, the all-time high set back during the dot-com era, is within reach and may just get there by year-end. The risk/reward seems favorable and, given the run in tech and cyber stocks which CSCO represents, the momentum is there to reach those highs.

Generac’s Power Play

Welcome to hurricane season! It lasts from June 1st to November 30. Generac (GNRC), a leader in home backup power, tends to perform well during weather extremes. It isn’t always the primary catalyst for rallies over the long term in the stock, but it can spur short-term rallies.

Last week, as much of the country was in the middle of a heat wave, GNRC had the best week of gains since November 2024, rallying nearly 12%. The trend change seems to be underway. Shares are lower by -8.1% year-to-date, and there’s room to run.

However, the charts are showing signs of life. Let’s keep this one as simple as possible.

The stock broke its longer-term downtrend (red line)

Shares have made a consistent set of higher lows (green uptrend)

Shares recaptured their 50-day moving average

Shares consolidated in an ascending triangle and broke out

Shares tested and failed to recapture their 200-day moving average

Progress is being made. The trend has changed, there’s something to reverse, and seasonal factors and reduced tariff concerns are a true tailwind.

Shares could easily pull back — a flag, if you will — to the $135 area, but should be a great entry point from a risk/reward perspective. Overall, shares are poised to continue reversing that longer-term downtrend, and could be a good addition to the portfolio for the end of 2025.

The Bottom Line

Each of these stocks offers a viable investment strategy with favorable risk-to-reward ratios. If you’re going to enter a position, use clearly-defined stop levels to manage your risks.

If you’ve looked at enough charts over time, you start to recognize classic patterns that often appear.  From head and shoulders tops to cup and handle patterns, they almost jump off the page when you bring up the chart.  I would definitely include Fibonacci Retracements on that list, because before I ever bring up the Fibonacci tool on StockCharts, I’m pretty confident the levels are going to line up well with the price action.

Today we’re going to look at a breakout name that shows why Fibonacci Retracements can be so valuable for confirming upside potential.  We’ll also explain some best practices for identifying the most important price levels to use when setting up a Fibonacci framework.  Finally, we’ll show how Fibonacci analysis could have helped you validate the current uptrend phase for the S&P 500 index.

Confirming Breakouts: Norwegian Cruise Line Holdings (NCLH)

I started dropping quite a few Fibonacci Retracements on price charts soon after the April 7, 2025 market low.  As stocks experienced a sudden and severe bounce off those lows, it became clear that we would need some way to validate a potential upside swing.  That helped me zero in on the $20 level for Norwegian (NCLH), a level which was finally eclipsed this week.

Using the January high and the April low, we can see a 38.2% Fibonacci level come in right around $20.  A gap higher in mid-May took NCLH close to that level, which was then retested again in early June.  After bouncing off the 50-day moving average last week, Norwegian finally pushed above this first Fibonacci resistance level with Friday’s rally.

One of the ways we can differentiate between a “dead cat bounce” off a major low and the beginning of a much larger recovery phase is to key in on the first Fibonacci retracement level.  If the price can push above this initial upside target, ideally on heavier than normal volume, then the chances of further upside are significantly increased.

In the case of NCLH, we can now bump up a price target to further Fibonacci levels.  The 50% line, just below $20, lines up fairly well with the 200-day moving average.  The 61.8% comes in right around $23.50, which represents my next upside target assuming this week’s strength is confirmed by a follow-through day next week.

Identifying Pullbacks: Raytheon Technologies (RTX)

We can also use Fibonacci Retracements to identify downside targets after a major price peak.  In the case of Raytheon Technologies (RTX), that means we use the April low and the high from mid-June to generate potential support levels.

In this case, we can see that the Fibonacci retracement levels line up very well with traditional support levels using the price action itself.  The 38.2% level lines up with the mid-June low around $135, which also coordinates with the 50-day moving average.  Beyond that support, the 50% level sits right at the late May low at $131, and the 61.8% level comes in right around the early May support at $126.  

Given an initial pullback from the June peak around $149, I’m seeing strong potential support at the 38.2% level and 50-day moving average around $135.  Now I can use Fibonacci levels to better define my risk vs. reward, showing how much downside action I’d anticipate while still keeping an eye on a return to the previous all-time highs.

Validating Uptrends: The S&P 500 Index ($SPX)

Sometimes Fibonacci Retracements are valuable in that they help validate that an uptrend is progressing with a decent pace.  For the S&P 500 chart, every break of a Fibonacci resistance level has confirmed the strength of the broad market indexes off the April low.

It took only two sessions for the SPX to break above the 38.2% retracement of the February to April downtrend phase.  In fact, the S&P almost reached the 50% level before pulling back to around 5100 in mid-April.  From there, we can see a gap back above the 38.2% level which helped confirm the strength of the new uptrend phase.

I still have the pink trendline on my chart that I remember drawing during the downtrend phase.  “As long as the S&P remains below trendline resistance, the market is in a clear downtrend,” I remember saying out loud on my market recap show.  So when the SPX broke above the 50% level, as well as that clear trendline, I was forced to acknowledge the staying power of this new uptrend phase.

The S&P 500 stalled out at the 61.8% retracement level in early May, but another price gap higher signaled that the final Fibonacci resistance level was no longer going to hold.  And once you eclipse the final Fibonacci level, that implies a full retest back to the 100% point.  

So am I surprised that the S&P 500 has pushed to new all-time highs this week?  Absolutely not.  Indeed, using Fibonacci Retracements on charts like this have helped me admit when a new uptrend is showing strength, and provide plenty of reminders to follow the trend until proven otherwise!

RR#6,

Dave

PS- Ready to upgrade your investment process?  Check out my free behavioral investing course!

David Keller, CMT

President and Chief Strategist

Sierra Alpha Research LLC

marketmisbehavior.com

https://www.youtube.com/c/MarketMisbehavior

Disclaimer: This blog is for educational purposes only and should not be construed as financial advice.  The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.  

The author does not have a position in mentioned securities at the time of publication.    Any opinions expressed herein are solely those of the author and do not in any way represent the views or opinions of any other person or entity.