These Stocks Are Close to Triangle Breakouts

Tickers in this Article: RCL, WYN, SHLD, FNFG

Triangles are a popular chart pattern because they are relatively easy to spot and offer well defined entry points, stops and profit targets. The profit target is usually two or three times more than the risk (but not always), thus providing an attractive reward-to-risk ratio. Over the last several months, these four stocks have seen price action that has been continually compressed. Like a spring, the price eventually breaks out of the tightening pattern providing a trading opportunity.
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Royal Caribbean Cruises Ltd. (RCL)

Royal Caribbean Cruises Ltd. (RCL) has been moving within a triangle pattern since the start of June. Each high point since June has been at a slightly different price, so using $57.50 as the breakout point eliminates some of the probability for a false breakout. If the breakout occurs, the upside target is $61.30 with a stop near $54 (below triangle). There is also a wedge pattern in play since April. Wedges are often reversal patterns, so a drop below $54 would break both the triangle and wedge pattern to the downside. Stops could be placed just above $57 with a target $50. The risk-to-reward is favorable for the trade, but not ideal. To lower the risk of the trade, a more conservative approach would be using a tighter stop: placing a stop about half way inside the pattern. This usually gives the trade more than enough room while reducing the risk of the price moving against you.
SEE: Profiting In Bear And Bull Markets

Wyndham Worldwide Corporation (WYN)
Wyndham Worldwide Corporation (WYN) was in a choppy triangle pattern since the beginning of 2014, and in July it broke to the upside. The price is still relatively close to thebreakout point of $75. The target for the breakout is $88 to $90, and a stop can be placed below $73. A drop back below $72 – which is less likely at this point – would mean the upside breakout was false. Unable to go higher, the downside target would be $64. A stop could be placed above $75 on the short trade should that scenario develop.
Sears Holdings Corporation (SHLD)
chart
Sears Holdings Corporation (SHLD) has been in a triangle pattern since it gapped down strongly in April. This stock is considerably volatile, seeing 50% moves in a matter of months, and sometimes weeks. A rally above $42.60 can be used as an upside breakout entry level. A stop goes below $38 and a target at $55. A drop below $37.60 breaks the pattern to the down side; place a stop above $42 and a target at $25.50.
First Niagara Financial Group Inc. (FNFG)
First Niagara Financial Group Inc. (FNFG) is consolidating after a large drop in January. This is not a perfect triangle pattern – the highs and lows don’t all line up with the trend lines – but the consolidating and tightening pattern can still be seen. This means some estimating must be done in order to determine an optimal entry point. A move above $9 provides enough evidence that a break is occurring. The target is $10.35 and a stop can be placed near $8.50. On the other hand, a drop below $8.50 would take out the June low and potentially signal a continuation of the overall downtrend. Downside target is $7.10 with a stop above $8.90.
The Bottom Line
Triangles typically provide a good reward to risk ratio, as well as defined entry points, stops and targets. To attain the estimated target, measure the height of the triangle at the widest point, and then add or subtract that from the breakout point (upside or downside breakout respectively). If the reward to risk isn’t as favorable as desired, the stop can be reduced and placed near the center of the pattern instead of on the opposite side. Triangles won’t always be perfect – often the prior highs or lows won’t line up exactly with the trendlines. That is ok, as long as we can see the price is consolidating, helping us determine an optimal entry point. Keep in mind all strategies carry risk of loss. Only risk a small percentage of account capital on any single trade.

Charts courtesy of Stockcharts.com
Disclosure – At the time of writing, the author did not own shares of any company mentioned in this article.

Recent Flag Pattern Breakouts

Commentary

Tickers in this Article: CMA, HPQ, POL, RXN

A flag is a small continuation pattern and these four stocks recently broke out of one, or are close to it. Flags provide an entry, stop and target, making them a relatively straightforward pattern to trade. The pattern is created by a strong run higher, followed by a small sideways or downward slanting consolidation, the flag. When the price breaks above the flag, initiate a long position, with a stop below the consolidation/flag. The target is traditionally based on the height of recent run higher, added to the bottom of the flag.On-balance volume can also be added to the chart to gauge the strength of trends and legitimacy of breakouts.

Hewlett-Packard Co. (HPQ)

Hewlett-Packard Co. (HPQ) popped higher on strong buying on June 13, and since then has been edging lower in a small channel or flag. A break above the flag at $35 is likely to spark further buying into the top of a trend channel at $37. The rising trend channel has been in place since December. The potential trade shouldn’t last more than a couple weeks and a stop can be placed below the low of the flag, currently $34.22. On-balance volume (OBV) is steadily rising, showing continued buying interest in the stock.
SEE: Profiting In Bear And Bull Markets

Comerica Inc. (CMA)
Comerica Inc. (CMA) is also in a trend channel extending back to early 2013. The price has consolidated through most of June, but broke out on June 20. The breakout signals a likely move toward the top of the channel near $55. A stop can be placed just below the $49.59 consolidation low. On-balance volume is also increasing steadily as it pushes back toward the March highs, indicating that buyers remain keen.
PolyOne Corp. (POL)
chart
PolyOne Corp. (POL) jumped 2.32% on June 20, and closed above a small consolidation which should mark the resumption of the uptrend. $43 is one target, based on a trend channel which began in May 2013. Based on the run higher in mid-May to early June, a more aggressive target is $45. Stops go below $40.08. A massive volume day in late May has resulted in a skewed OBV. Even so, since that time the indicator has been trending higher, signaling that the uptrend is healthy and likely to continue.
Rexnord Corp. (RXN)
Finally, Rexnord Corp. (RXN) is currently in a flag formation following a strong run higher in early June. Since March, though, the stock is in a downtrend, with resistance right near the flag breakout point. If the price breaks above the flag it will spark a short-term move higher but also potentially initiate the next wave higher of the long-term trend. Target for the flag breakout is $32, with a stop below $27.91. OBV broke above its own descending trendline recently, indicating the buyers have the upper hand and an upside breakout is more likely than a downside breakout. (For related reading, see: Continuation Patterns: Rectangles and Pennants)
The Bottom Line
Flags are a small continuation pattern which provide and entry point, stop and target. On-balance volume can be used in conjunction with flags, and other chart patterns, to see the health of the trend. Stops should always be used, as the price won’t always trend in the anticipated direction, even after a breakout. Manage position size so that a single loss won’t significantly draw down account capital.

Charts courtesy of Stockcharts.com
Disclosure – At the time of writing, the author did not own shares of any company mentioned in this article.

Stocks on the Verge of Major Support or Resistance Breaks

Commentary

Tickers in this Article: OXY, FLR, FLEX, URBN

The price action in these stocks has been compressed in recent months, repeatedly testing support and resistance levels. As the price action becomes more and more constricted, a breakout inevitably follows. The four stocks are all nearing such a breakout point.
Occidental Petroleum (NYSE:OXY)

Occidental Petroleum (NYSE:OXY) has been pushing at $98 since February, but can’t close above it (unadjusted). The swing lows since March are creeping up though, creating a narrowing range. A daily close above $98 breaks the consolidation and sets targets of $103 and $105. Once the breakout occurs a stop-loss is placed below the recent swing low (currently unknown), most likely in the $95 region. If the price drops below the May low at $93.80, look for continuation to the downside. The target is $89 to $88, as this is where longer-term traders could step in to offer buying support. Ideally a stop-loss for the short-trade is placed within the pattern above a recent swing high (currently unknown), most likely in the $97 region.
SEE: Profiting In Bear And Bull Markets

Flour (NYSE:FLR)
Fluor (NYSE:FLR) is in a descending triangle which had offered support above $73.32 (low of the pattern) on numerous occasions in 2014. On May 16 the price closed below that level, indicating a downside breakout. The triangle is approximately $10 in height (rounded down); subtract $10 from the breakout price of $73.32 to attain a target of $63.32, or $64 to be conservative. Stop loss is initially placed above $77.81, but moved lower once a lower swing high forms. If the downside breakout fails, look for an upside breakout above $77.81. Target for the upside breakout is $88, with an initial stop below $73.
Flextronics International (Nasdaq:FLEX)
chart
Flextronics International (Nasdaq:FLEX) is pushing at the top of a rising channel. Since the top of the channel is progressively getting higher an exact breakout price is harder to pinpoint. For this type of pattern, let the pattern breakout and move to at least $10 or higher, then buy a pullback near $9.85 with a stop below $9.25. The target is $10.75, but based on the resistance which will be broker if this occurs the price could continue to trend higher. If the price fails to break higher, a move below $8.82 could push the price to support at $7.75 to $7.25. For the downside breakout, place an initial stop above $9.25 and reduce it as lower swing highs form.
Urban Outfitters (Nasdaq:URBN)
Urban Outfitters (Nasdaq:URBN) has lacked a trend since the latter part of 2012, but since late 2013 the price action has become even more constricted. A downside breakout is more compelling than an upside breakout because of the lack of support below the consolidation. A daily close below $33.95, especially on larger than average volume, should end the deadlock and send the price to $28. Initial stop is placed above $37 and dropped as lower swing highs form.
The Bottom Line
When price action becomes constricted it will eventually breakout. In hindsight, breakouts look easy to trade, but the main drawback of breakouts is that we don’t know when they will occur. False breakouts are a reality of breakout trading. With any breakout trade, make sure the expected reward exceeds the risk (target versus stop-loss), in this way, even if half the breakouts trades end up losing money, the winners will more than cover those losses. Keep position sizes to such a level that a single loss doesn’t significantly draw down the account; risking 1% or less per trade is recommended.

Charts courtesy of Stockcharts.com
Disclosure – At the time of writing, the author did not own shares of any company mentioned in this article.

Key Market Reports and Commentary for Monday 28/04/2014

Morning Markets Report
Prepared on Monday, April 28, 2014

Copyright 2014 INO.com. All Rights Reserved.

Summary
The Dow Future is trending higher 59 points to 16383. The US Dollar Index moved lower 0.202 points to 79.596. Gold has retreated 3.795 dollars to 1301.550. Silver is lower 0.1105 dollars to 19.6150. The Dow Industrials trended lower by 140.19 points, at 16361.46, while the S&P 500 moved lower 15.21 points, last seen at 1863.40. The Nasdaq Composite slipped 72.88 points to 4075.46. Streaming charts of these markets are available 24/7 at MarketClub

Blog Postings and Videos
Sun Tzu and the Art of War for Traders
Sunday Apr 27th

Putin’s Secret Weapon – How Russia Could Take Down America Without Firing a Single Shot
Saturday Apr 26th

Weekly Futures Recap With Mike Seery
Friday Apr 25th

Key Events for Monday

8:30 AM ET. March Chicago Fed Midwest Manufacturing Index

Manufacturing Index (MoM) (previous +0.8%)

Manufacturing Index (YoY) (previous +5.9%)

Auto Output Index (MoM) (previous -0.1%)

Auto Output Index (YoY) (previous +12.4%)

Machinery Output Index (MoM) (previous +1.7%)

Machinery Output Index (YoY) (previous +2%)

Resource Output Index (MoM) (previous +0.5%)

Resource Output Index (YoY) (previous +2.6%)

Steel Output Index (MoM) (previous +1.6%)

Steel Output Index (YoY) (previous +3.8%)

10:00 AM ET. March Pending Home Sales Index

Current (previous 93.9)

MoM Pct Change (Current Period) (previous -0.8%)

YoY Pct Change (Current Period) (previous -10.5%)

10:30 AM ET. April Texas Manufacturing Outlook Survey

Business Activity Index (previous 4.9)

Manufacturing Production Index (previous

7:45 AM ET. ICSC-Goldman Sachs Chain Store Sales Index

Chain Store Sales Index – WoW (previous +0.4%)

Chain Store Sales Index – YoY (previous +1.9%)

8:55 AM ET. Johnson Redbook Retail Sales Index

MoM % Change (previous -0.5%)

12MonChgPct (previous +3.2%)

52WkChgPct (previous +3.7%)

9:00 AM ET. Feb S&P / Case-Shiller Home Price Index

10-city Index, M/M (previous +0%)

10-city Index, Y/Y (previous +13.5%)

20-city Index, M/M (previous -0.1%)

20-city Index, Y/Y (previous +13.2%)

National Q/Q

National Y/Y

10:00 AM ET. 1st Quarter U.S. Housing Vacancies

10:00 AM ET. March Metropolitan Area Employment & Unemployment

10:00 AM ET. U.S. Treasury Sec Lew testifies to House Appropriations Committee on budget

10:00 AM ET. April Consumer Confidence Index

Consumer Confidence Index (previous 82.3)

Expectation Index (previous 83.5)

Present Situation Index (previous 80.4)

4:30 PM ET. API Weekly Statistical Bulletin

Crude Stocks (Net Change) (previous +0.52M)

Gasoline Stocks (Net Change) (previous -3.4M)

Distillate Stocks (Net Change) (previous +0.57M)

Refinery Runs (previous 89.8%)

N/A ICBA Washington Policy Summit

N/A U.S. Federal Open Market Committee

7:00 AM ET. MBA Weekly Mortgage Applications Survey

Market Composite Index (previous 354)

Market Composite Index Cur Chg (previous -3.3%)

Purchase Index (S.A.) (previous 178)

Purchase Index (S.A.) Cur Chg (previous -2.6%)

Refinance Index (previous 1361.4)

Refinance Index Cur Chg (previous -3.7%)

8:15 AM ET. April ADP National Employment Report

Private Payrolls Forecast (previous +191000)

8:30 AM ET. 1st Quarter Employment Cost Index

ECI Qtlry (previous +0.5%)

ECI Yearly (previous +2%)

8:30 AM ET. 1st Quarter Advance estimate GDP

GDP (previous +2.6%)

Chain-Weighted Price Index (previous +1.6%)

PCE Price index (previous +1.1%)

Purchase Price Index (previous +1.5%)

Real Final Sales (previous +2.7%)

Core PCE Price index (Ex Food/Energy) (previous +1.3%)

Personal Consumption (previous +3.3%)

9:45 AM ET. April ISM-Chicago Business Survey – Chicago PMI

Employment Index (previous 50)

New Orders Index (previous 58.8)

Prices Paid Index (previous 55.7)

Purchasing Managers Index (Adjusted) (previous 55.9)

Supplier Deliveries Index (previous 58.6)

10:00 AM ET. April Online Help Wanted Index

10:30 AM ET. EIA Weekly Petroleum Status Report

Crude Oil Stocks (previous 397.66M)

Crude Oil Stocks (Net Change) (previous +3.52M)

Gasoline Stocks (previous 210.01M)

Gasoline Stocks (Net Change) (previous -0.27M)

Distillate Stocks (previous 112.51M)

Distillate Stocks (Net Change) (previous +0.6M)

Refinery Usage (previous 91%)

Total Products Supplied (previous 18.05M)

Total Products Supplied (Net Change) (previous -0.36M)

1:00 PM ET. April Dow Jones Economic Sentiment Indicator

DJ Economic Sentiment Indicator (previous 51.7)

2:00 PM ET. U.S. interest rate decision

Federal Funds Rate

Federal Funds Rate Change (Pts)

Federal Funds Rate (Dir) (previous +0)

Discount Rate

Discount Rate Change

FOMC Vote For Action (previous 8)

FOMC Vote Against Action (previous 1)

High Range Value (Current Period)

Low Range Value

Federal Funds Rate Change High Range (previous 0.25)

Federal Funds Rate Change Low Range (previous 0)

3:00 PM ET. April Agricultural Prices

Farm Prices, M/M (previous

7:30 AM ET. April Challenger Job-Cut Report

Job Cuts, M/M (previous -18%)

8:30 AM ET. Unemployment Insurance Weekly Claims Report – Initial Claims

Weekly Jobless Claims (previous 329K)

Weekly Jobless Claims Net Change (previous +24K)

Cont Jobless Claims (prior week) (previous 2680000)

Cont Jobless Claims Net Chg (prior week) (previous -61K)

8:30 AM ET. U.S. Weekly Export Sales

Corn, In Metric Tons (previous 1436.7K)

Soybeans, In Metric Tons (previous 546.8K)

Wheat, In Metric Tons (previous 728K)

8:30 AM ET. March Personal Income & Outlays

Personal Income (previous +0.3%)

Personal Spending (previous +0.3%)

PCE Price Index Monthly (previous +0.1%)

PCE Price Index Yearly (previous +0.9%)

PCE Core Price Index Monthly +0.1%)

PCE Core Price Index Yearly +1.1%

9:00 AM ET. April US Manufacturing PMI

9:45 AM ET. Bloomberg Consumer Comfort Index

10:00 March Construction Spending – Construction Put in Place

New Construction (previous +0.1%)

Residential Construction

10:00 AM ET. April ISM Manufacturing Report on Business

Manufacturing PMI (previous 53.7)

Prices Index (previous 59)

Employment Index (previous 51.1)

Inventories (previous 52.5)

New Orders Index (previous 55.1)

Production Index (previous 55.9)

10:00 AM ET. DJ-BTMU U.S. Business Barometer

DJ-BTMU Business Barometer (previous -0.1%)

DJ-BTMU Business Barometer (52 Wk) (previous +0.4%)

10:30 AM ET. EIA Weekly Natural Gas Storage Report

Total Working Gas in Storage (previous 899B)

Total Working Gas in Storage (Net Change) (previous +49B)

4:00 AM ET. April Domestic Auto Industry Sales

Annualized Vehicle Sales (previous 16.4M)

4:30 PM ET. Federal Discount Window Borrowings

4:30 PM ET. Foreign Central Bank Holdings

4:30 PM ET. Money Stock

8:30 AM ET. April U.S. Employment Report

Non-Farm Payrolls (previous +192K)

Unemployment Rate (previous 6.7%)

Average Hourly Earnings (previous 24.3)

Average Hourly Earnings Net Change (previous -0.01)

Manufacturing Payrolls (previous -1K)

Overall Workweek (previous 34.5)

Overall Workweek Net Change (previous +0.2)

Service Producing Payrolls (previous +167K)

Government Payrolls (previous +0)

Federal Payrolls (previous -9K)

Non-Farm Payrolls (Bench Net Chg)

Private Payroll (previous +192K)

9:45 AM ET. April ISM-NY Report on Business

US ISM-NY Business Index (previous 52)

10:00 AM ET. March Manufacturers’ Shipments, Inventories & Orders (M3)

Total Orders (previous +1.6%)

Orders, Ex-Defense (previous +1.3%)

Orders, Ex-Transportation (previous +0.7%)

Durable Goods 1st Est (previous +2.2%)

Durable Goods Revised


 

Currencies Snapshot
Symbol Last Change %
US DOLLAR INDEX 79.596 -0.202 -0.26%
POWERSHARES DB US DOLLAR INDEX 21.34 0.00 0.00%
US Dollar/Canadian Dollar 1.10220 -0.00119 -0.11%
Euro/US Dollar 1.386910 +0.004390 +0.32%
JAPANESE YEN Jun 2014 0.009772 -0.000023 -0.23%
SWISS FRANC Jun 2014 1.1393 +0.0037 +0.33%

CURRENCIES

The June Dollar was lower overnight. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near-term. If June renews this month’s decline, weekly support crossing at 78.91 is the next downside target. Closes above the 20-day moving average crossing at 79.98 are needed to confirm that a short-term low has been posted. First resistance is the 20-day moving average crossing at 79.98. Second resistance is the 38% retracement level of the January-March-decline crossing at 80.24. First support is March’s low crossing at 79.37. Second support is weekly support crossing at 78.91.

The June Euro was higher overnight while extending the trading range of the past three weeks. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near-term. If June renews this month’s rally, March’s high crossing at 139.66 is the next upside target. Closes below the 20-day moving average crossing at 138.04 are needed to confirm that a short-term top has been posted. First resistance is the reaction high crossing at 139.03. Second resistance is March’s high crossing at 139.66. First support is the 20-day moving average crossing at 138.04. Second support is the 62% retracement level of the February-March-rally crossing at 136.67.

The June British Pound was higher overnight and posted a new contract high as it renewed the rally off last November’s low. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If June extends the rally off March’s low, monthly resistance crossing at 1.7043 is the next upside target. Closes below the 20-day moving average crossing at 1.6725 would confirm that a short-term top has been posted. First resistance is the overnight high crossing at 1.6849. Second resistance is monthly resistance crossing at 1.7043. First support is the 20-day moving average crossing at 1.6725. Second support is the reaction low crossing at 1.6640.

The June Swiss Franc was higher overnight as it extends the rally off last week’s low. Stochastics and the RSI have turned bullish signaling that sideways to higher prices are possible near-term. If June extends the rally off last week’s low, April’s high crossing at 1.1443 is the next upside target. If June extends the decline off April’s high, the 50% retracement level of the January-March-rally crossing at 1.1226 is the next downside target. First resistance is April’s high crossing at 1.1443. Second resistance is March’s high crossing at 1.1503. First support is the 38% retracement level of the January-March-rally crossing at 1.1292. Second support is the 50% retracement level of the January-March-rally crossing at 1.1226.

The June Canadian Dollar was slightly higher overnight. Stochastics and the RSI are oversold but remain neutral to bearish signaling that sideways to lower prices are possible near-term. If June extends the decline off April’s high, March’s low crossing at 88.45 is the next downside target. Multiple closes above the 20-day moving average crossing at 90.82 would confirm that a short-term low has been posted. First resistance is April’s high crossing at 91.95. Second resistance is the 38% retracement level of the 2013-2014-decline crossing at 92.96. First support is last Wednesday’s low crossing at 90.35. Second support is March’s low crossing at 88.45.

The June Japanese Yen was lower overnight. Stochastics and the RSI are turning neutral to bearish signaling that sideways to lower prices are possible near-term. If June renews the rally off April’s low, March’s high crossing at .9889 is the next upside target. If June extends this month’s decline, April’s low crossing at .9598 is the next downside target. From a broad perspective, June needs to close above .9930 or below .9598 to confirm a breakout of a three-month old trading range. First resistance is March’s high crossing at .9889. Second resistance is February’s high crossing at .9930. First support is last Tuesday’s low crossing at .9737. Second support is April’s low crossing at .9598.


 

Energy Snapshot
Symbol Last Change %
CRUDE OIL Jun 2014 101.13 +0.53 +0.53%
NY HARBOR ULSD HEATING OIL Jun 2014 2.9876 +0.0067 +0.22%
NATURAL GAS Jun 2014 4.689 +0.031 +0.67%
RBOB GASOLINE Jun 2014 3.0281 +0.0015 +0.05%
POWERSHARES DWA ENERGY MOMENT 59.57 -1.33 -2.23%
UNITED STATES GASOLINE 62.3400 +0.3199 +0.52%

ENERGIES

June Nymex crude oil was higher due to short covering overnight as it consolidates some of the decline off April’s high but remains below the 20-day moving average. Stochastics and the RSI are neutral to bearish signaling that sideways to lower prices are possible near-term. Multiple closes below the 20-day moving average crossing at 101.57 would confirm that a short-term top has been posted while opening the door for additional weakness into early-May. Closes above the 10-day moving average crossing at 102.34 would signal that a short-term low has been posted. First resistance is April’s high crossing at 104.10. Second resistance is weekly resistance crossing at 107.49. First support is the 38% retracement level of the January-April-rally crossing at 99.10. Second support is the 50% retracement level of the January-April-rally crossing at 97.54.

June heating oil was higher overnight as it extends the trading range of the past seven days. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If June extends this month’s rally, the 87% retracement level of the March-April-decline crossing at 302.19 is the next upside target. Closes below the 20-day moving average crossing at 295.01 would confirm that a short-term top has been posted. First resistance is the 87% retracement level of the March-April-decline crossing at 302.19. Second resistance is March’s high crossing at 304.80. First support is the reaction low crossing at 297.15. Second support is the 20-day moving average crossing at 295.01.

June unleaded gas was slightly higher overnight. Stochastics and the RSI are overbought and are turning neutral to bearish hinting that a short-term top might be in or is near. Closes below the 20-day moving average crossing at 297.32 would confirm that a short-term top has been posted. If June extends this month’s rally, weekly resistance crossing at 310.95 is the next upside target. First resistance is last Thursday’s high crossing at 306.10. Second resistance is weekly resistance crossing at 310.95. First support is the 10-day moving average crossing at 302.82. Second support is the 20-day moving average crossing at 297.32.

June Henry natural gas was slightly higher overnight. Stochastics and the RSI are neutral to bearish hinting that a short-term top might be in or is near. Closes below the 20-day moving average crossing at 4.589 would confirm that a short-term top has been posted. If June extends this month’s rally, February’s high crossing at 4.893 is the next upside target. First resistance is last Thursday’s high crossing at 4.818. Second resistance is February’s high crossing at 4.893. First support is the 20-day moving average crossing at 4.589. Second support is the reaction low crossing at 4.500.


 

Food Snapshot
Symbol Last Change %
COCOA Jul 2014 2963 +10 +0.34%
COFFEE Jul 2014 202.8 -4.2 -2.05%
ORANGE JUICE-A Jul 2014 165.00 -1.15 -0.70%
IPATH DJ-UBS SUGAR TRUST 56.540 -0.060 -0.11%
IPATH DJ-UBS SOFTS TRUST 55.82 -0.02 -0.04%

FOOD & FIBER

May coffee closed lower due to profit taking on Friday. The low-range close set the stage for a steady to lower opening on Monday. Stochastics and the RSI are diverging and are turning neutral to bearish signaling that a short-term top might be in or is near. Closes below the 20-day moving average crossing at 19.42 would confirm that a short-term top has been posted. If May extends this month’s rally, the 75% retracement level of the 2011-2013-decline crossing at 23.20 is the next upside target.

May cocoa closed lower on Friday. The low-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are bearish signaling that sideways to lower prices are possible near-term. If May extends the decline off March’s high, the reaction low crossing at 28.86 is the next downside target. If May renews the rally off April’s low, March’s high crossing at 30.39 is the next upside target.

May sugar closed higher on Friday. The mid-range close set the stage for a steady opening on Monday. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near-term. If May extends the rally off last week’s low, the reaction high crossing at 18.10 is the next upside target. Closes below the 10-day moving average crossing at 16.90 would temper the near-term friendly outlook.

May cotton closed higher on Friday. The high-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near-term. If May extends this week’s rally, the reaction high crossing at 94.80 is the next upside target. Closes below the 10-day moving average crossing at 91.03 would temper the near-term friendly outlook.


 

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Grains Snapshot
Symbol Last Change %
CORN Jul 2014 515.50 +2.75 +0.54%
OATS Jul 2014 364.5 +6.5 +1.82%
WHEAT Jul 2014 710.00 +1.75 +0.25%
TEUCRIUM CORN 34.980 +0.300 +0.86%
IPATH DJ-UBS GRAINS TRUST 51.3499 +0.7999 +1.56%
ELEMENTS MLCX GRAINS INDEX TRUST 6.6100 -0.0299 -0.44%
SOYBEANS Jul 2014 1506.50 +12.25 +0.82%
SOYBEAN (MINI) Nov 2014 1239.75 +8.25 +0.67%
SOYBEAN MEAL Jul 2014 486.9 +5.5 +1.14%
TEUCRIUM SOYBEAN 25.7600 +0.2300 +0.89%

GRAINS

May corn was higher overnight as it extends the rally off last Monday’s low. Traders will be looking at this afternoon’s planting progress report along with the extended weather forecast for near-term direction in the market. Given the current weather pattern for this week, it appears unlikely that little if any corn planting will be done in the Midwest this week. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near-term. If May extends the rally off last week’s low, April’s high crossing at 5.19 is the next upside target. If May renews the decline off April’s high, the 38% retracement level of the January-April-rally crossing at 4.79 is the next downside target. First resistance is the overnight high crossing at 5.11 3/4. Second resistance is April’s high crossing at 5.19. First support is last Monday’s low crossing at 4.85 1/2. Second support is the 38% retracement level of the January-April-rally crossing at 4.79.

May wheat was higher overnight as it extends last week’s rally. The mid-range close sets the stage for a steady to higher opening when the day session begins trading. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near-term. If May extends last week’s rally, the reaction high crossing at 7.11 is the next upside target. Closes below the 20-day moving average crossing at 6.80 3/4 would temper the bearish outlook. First resistance is the reaction high crossing at 7.11. Second resistance is March’s high crossing at 7.23 1/2. First support is the 38% retracement level of this year’s rally crossing at 6.58 3/4. Second support is the 50% retracement level of this year’s rally crossing at 6.38 1/2.

May Kansas City Wheat closed up 16 1/4-cents at 7.75 3/4.

May Kansas City wheat closed higher on Friday. Today’s high-range close sets the stage for a steady to higher opening on Monday. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. If May extends this week’s rally, March’s high crossing at 7.94 1/2 is the next upside target. Closes below the 20-day moving average crossing at 7.46 1/2 would confirm that a short-term top has been posted. First resistance is today’s high crossing at 7.75 3/4. Second resistance is March’s high crossing at 7.94 1/2. First support is the 20-day moving average crossing at 7.46 1/2. Second support is the reaction low crossing at 7.19.

May Minneapolis wheat was higher overnight as it extends this month’s rally. The low-range close sets the stage for a steady to higher opening when the day session begins trading later this morning. Stochastics and the RSI are overbought but remain neutral to bullish signaling that a low might be in or is near. If May extends this month’s rally, March’s high crossing at 7.70 is the next upside target. Closes below the 20-day moving average crossing at 7.26 would confirm that a short-term top has been posted. First resistance is the overnight high crossing at 7.55. Second resistance is March’s high crossing at 7.70. First support is the 38% retracement level of this year’s rally crossing at 7.03 1/4. Second support is the 50% retracement level of this year’s rally crossing at 6.82 1/2.

SOYBEAN COMPLEX http://quotes.ino.com/ex changes/?c=grains

May soybeans were higher overnight as it extends last Friday’s rally. Tight supplies along with weather related concerns are helping to underpin soybean prices. The high-range close sets the stage for a steady to higher opening when the day session begins trading. Stochastics and the RSI are neutral to bullish signaling that additional strength is possible near-term. If May renews this year’s rally, weekly resistance crossing at 15.61 is the next upside target. Closes below the reaction low crossing at 14.64 would confirm that a short-term top has been posted. First resistance is April’s high crossing at 15.31 3/4. Second resistance is weekly resistance crossing at 15.61. First support is the reaction low crossing at 14.64. Second support is the 38% retracement level of this year’s rally crossing at 14.23.

May soybean meal was sharply higher overnight and posted a new contract high as it extends this year’s rally. The high-range close sets the stage for a steady to higher opening when the day session begins trading. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near-term. If May extends this year’s rally, weekly resistance crossing at 505.90 is the next upside target. Closes below the reaction low crossing at 477.00 would confirm that a short-term top has been posted. First resistance is the overnight high crossing at 500.90. Second resistance is weekly resistance crossing at 505.90. First support is the reaction low crossing at 477.00. Second support is the reaction low crossing at 472.00.

May soybean oil was higher overnight. The mid-range close sets the stage for a steady to higher opening when the day session begins trading. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near-term. If May renews this month’s rally, March’s high crossing at 45.05 is the next upside target. Closes below the 20-day moving average crossing at 42.30 would confirm that a short-term top has been posted. First resistance is the reaction high crossing at 43.74. Second resistance is March’s high crossing at 45.05. First support is the 20-day moving average crossing at 42.30. Second support is the reaction low crossing at 41.11.


 

Indexes Snapshot
Symbol Last Change %
DJ 30 INDUSTRIALS 16361.46 -140.19 -0.86%
NASDAQ COMPOSITE INDEX (COMBINED) 4075.46 -72.88 -1.79%
S&P 500 CASH 1863.40 -15.21 -0.82%
SPDR S&P 500 186.26 -1.57 -0.84%
QQQQ VOLATILITY INDEX 13.25 -1.10 -8.30%
iShares RUSSELL 2000 INDEX 111.58 -2.03 -1.82%

U.S. STOCK INDEXES

The June NASDAQ 100 was higher due to short covering overnight as it consolidates some of last Friday’s decline. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near-term. If June extends the rally off April’s low, April’s high crossing at 3669.00 is the next upside target. Closes below the 10-day moving average crossing at 3533.07 would confirm that a short-term top has been posted. First resistance is April’s high crossing at 3669.00. Second resistance is March’s high crossing at 3733.25. First support is the 10-day moving average crossing at 3533.07. Second support is April’s low crossing at 3404.75.

The June S&P 500 was higher overnight as it consolidates some of last Friday’s decline. Stochastics and the RSI remain neutral to bullish signaling that sideways to higher prices are possible near-term. If June extends the rally off April’s low, April’s high crossing at 1892.00 is the next upside target. Closes below the 20-day moving average crossing at 1856.93 would confirm that a short-term top has been posted. First resistance is last Thursday’s high crossing at 1882.30. Second resistance is April’s high crossing at 1892.00. First support is the 20-day moving average crossing at 1856.93. Second support is the 50% retracement level of the February-April-rally crossing at 1809.03.


 

Interest Snapshot
Symbol Last Change %
T-BONDS Jun 2014 134.59375 -0.34375 -0.25%
iShares FLOATING RATE NOTE 50.7420 +0.0120 +0.02%
5 YEAR T-NOTES Jun 2014 119.125000 -0.054688 -0.05%
ULTRA T-BONDS Jun 2014 147.12500 -0.53125 -0.36%
POWERSHARES SENIOR LOAN PORTF 24.635 -0.015 -0.06%

INTEREST RATES

June T-bonds were lower overnight as it consolidates some of last week’s rally. Stochastics and the RSI are diverging but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If June renews this month’s rally, weekly resistance crossing at 135-24 is the next upside target. Closes below the 20-day moving average crossing at 133-29 are needed to confirm that a short-term top has been posted. First resistance is this month’s high crossing at 135-10. Second resistance is weekly resistance crossing at 135-24. First support is the 20-day moving average crossing at 133-29. Second support is this month’s low crossing at 131-21.


 

Livestock Snapshot
Symbol Last Change %
FEEDER CATTLE Aug 2014 184.625 +0.575 +0.31%
LEAN HOGS Jun 2014 124.525 -1.025 -0.82%
LIVE CATTLE Jun 2014 136.775 +0.925 +0.67%
IPATH DJ-UBS LIVESTOCK TRUST SUB 31.4920 -0.0080 -0.03%

LIVESTOCK

June hogs closed down $1.02 at $124.52.

June hogs closed lower on Friday as it consolidated some of its recent gains. The low-range close sets the stage for a steady to lower opening when Monday’s night session begins trading. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near-term. If June extends the rally off April’s low, the reaction high crossing at 130.60 is the next upside target. Closes below the 10-day moving average crossing at 123.69 would confirm that a short-term top has been posted. First resistance is the reaction high crossing at 130.60. Second resistance is March’s high crossing at 133.40. First support is the reaction low crossing at 118.55. Second support is the 38% retracement level of the 2012-2014-rally crossing at 115.98.

June cattle closed up $0.92 at 135.77.

June cattle closed higher on Friday and above the 20-day moving average crossing at 135.83 confirming that a low has been posted. The high-range close sets the stage for a steady to higher opening when Monday’s session begins trading. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. If June extends today’s rally, March’s high crossing at 139.00 is the next upside target. First resistance is today’s high crossing at 136.95. Second resistance is March’s high crossing at 139.00. First support is the 38% retracement level of the November-March-rally crossing at 134.24. Second support is the 50% retracement level of the November-March-rally crossing at 132.75.

May feeder cattle closed up $0.40 at $180.00.

May Feeder cattle closed higher on Friday. Today’s mid-range close sets the stage for a steady to higher opening when Monday’s night session begins trading. Stochastics and the RSI are bullish signaling that sideways to higher prices are possible near-term. If May extends the rally off Monday’s low, April’s high crossing at 180.45 is the next upside target. Closes below Monday’s low crossing at 177.50 would confirm that a short-term top has been posted. First resistance is today’s high crossing at 180.25. Second resistance is April’s high crossing at 180.45. First support is Monday’s low crossing at 177.50. Second support is the reaction low crossing at 176.62.


 

Metals Snapshot
Symbol Last Change %
GOLD Jun 2014 1300.4 -0.4 -0.03%
SPDR GOLD SHARES 125.35 +0.79 +0.63%
SILVER Jul 2014 19.620 -0.098 -0.50%
PALLADIUM Jun 2014 809.90 -1.30 -0.16%
DIREXION DAILY GOLD MINERS BEA 22.80 -1.44 -6.36%
POWERSHARES DB PRECIOUS METALS 41.5552 +0.3252 +0.78%

PRECIOUS METALS

June gold was lower overnight as it consolidates some of the rally off last Thursday’s low. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near-term. If June extends the rally off last week’s low, April’s high crossing at 1331.40 is the next upside target. If June renews the decline off April’s high, the 62% retracement level of the January-March-rally crossing at 1265.10 is the next downside target. First resistance is April’s high crossing at 1331.40. Second resistance is the reaction high crossing at 1343.20. First support is the 62% retracement level of the January-March-rally crossing at 1265.10. Second support is the 75% retracement level of the January-March-rally crossing at 1237.80.

May silver was lower overnight. Stochastics and the RSI are neutral to bullish signaling that sideways to higher prices are possible near-term. Multiple closes above the 20-day moving average crossing at 19.743 are needed to confirm that a short-term low has been posted. If May extends the decline off February’s high, January’s low crossing at 18.800 is the next downside target. First resistance is the 20-day moving average crossing at 19.743. Second resistance is April’s high crossing at 20.400. First support is last Thursday’s low crossing at 18.930. Second support is January’s low crossing at 18.800.

May copper was slightly higher overnight as it extends the rally off March’s low. Stochastics and the RSI are overbought but remain neutral to bullish signaling that sideways to higher prices are possible near-term. If May extends the rally off March’s low, the 50% retracement level of the December-March crossing at 314.55 is the next upside target. Closes below the 20-day moving average crossing at 305.03 would confirm that a short-term top has been posted. First resistance is the 50% retracement level of the December-March-decline crossing at 314.55. Second resistance is the 62% retracement level of the December-March-decline crossing at 320.90. First support it the 20-day moving average crossing at 305.03. Second support is the reaction low crossing at 296.55.


 

Top Stocks
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1. AAPL APPLE 571.94 +4.17 +0.73% 13,844,013 +100    Entry Signal
2. NLY ANNALY CAPITAL 11.55 +0.12 +1.04% 12,617,543 +100    Entry Signal
3. RFMD RF MICRO DEVICES 7.99 -0.55 -6.88% 11,849,617 +90    Entry Signal
4. NEM NEWMONT MINING 26.455 +0.965 +3.65% 10,917,343 +100    Entry Signal
5. DAL DELTA AIR LINES 36.05 -0.68 -1.89% 9,744,042 +90    Entry Signal
6. DHI DR HORTON 22.505 -0.625 -2.78% 9,442,311 +90    Entry Signal
7. SUNE SUNEDISON INC 19.71 -0.55 -2.78% 9,044,295 +90    Entry Signal
8. MO ALTRIA 39.040 +0.640 +1.64% 7,448,025 +100    Entry Signal
9. HCA HCA HOLDINGS 53.35 +2.82 +5.28% 7,370,517 +100    Entry Signal
10. AIG AMERICAN INTL 51.600 -0.890 -1.72% 6,763,059 +90    Entry Signal
Top Futures
# symbol name last net % volume score triangles
1. ED.Z17 EURODOLLAR Dec 2017 96.925 +0.020 +0.02% 30,660 +100    Entry Signal
2. ED.H18 EURODOLLAR Mar 2018 96.770 +0.020 +0.02% 28,359 +100    Entry Signal
3. KW.N14 HARD RED WINTER WHEAT Jul 2014 779.5 +14.0 +1.80% 11,858 +100    Entry Signal
4. ED.U18 EURODOLLAR Sep 2018 96.500 +0.030 +0.03% 11,428 +100    Entry Signal
5. ZL.N14.E SOYBEAN OIL Jul 2014 43.23 +0.08 +0.19% 10,960 +100    Entry Signal
6. ED.Z18 EURODOLLAR Dec 2018 96.385 +0.030 +0.03% 7,832 +100    Entry Signal
7. ZS.X14.E SOYBEANS Nov 2014 1245.50 +5.75 +0.46% 7,008 +100    Entry Signal
8. C.H15 CORN Mar 2015 514.25 +3.50 +0.68% 2,197 +100    Entry Signal
9. ZL.Z14.E SOYBEAN OIL Dec 2014 42.31 +0.10 +0.24% 1,613 +100    Entry Signal
10. GE.Z18.E EURODOLLAR Dec 2018 96.355 -0.030 -0.03% 1,083 +100    Entry Signal

Consolidations Leading to Upside Breakouts?

Commentary

Tickers in this Article: HAL, DLB, CBOE, TEL

During a strong trend, many traders wait for a big pullback to enter because it feels like a “better deal.” Unfortunately, during a strong trend, these deeper pullbacks may not occur (or not frequently enough for active traders). Instead, a more sideways consolidation often develops. These four stocks are currently in relatively small consolidations, so a breakout to the upside signals the trend is continuing. Typically these trades can be initiated with relatively low risk and with price targets quickly achieved.
Halliburton (NYSE:HAL)

Halliburton (NYSE:HAL) is in a long-term uptrend and has had another nice run higher since the start of February. The price is currently consolidating, beyond the former 52-week high, between $59.69 and $57.36. If the price breaks higher, it indicates this current up-leg is continuing. Target is $62 to $62.40. A drop back below $57.36 warns of short-term selling pressure. A drop below $54.57 signals a larger correction into trendline support near $52–a region longer-term traders may wish to monitor for buying opportunities.
SEE: Beginner’s Guide To MetaTrader 4

Dolby Laboratories (NYSE:DLB)
Dolby Laboratories (NYSE:DLB) had a near-vertical rally in early March, but has moved sideways since March 10. The high of the consolidation is $45.16, and the low is $43.27. The stock did something similar in January and February, moving within a range, with a number of false breakouts. Therefore, waiting for a daily close outside the range may help avoid the false breakouts. The trend is up, so a long could also be initiated anywhere in the range, with a stop below $43.20 and the expectation of a breakout higher. Upside target is $47.10 to $47.60.
CBOE Holdings (Nasdaq:CBOE)
chart
CBOE Holdings (Nasdaq:CBOE) has formed a small triangle pattern off the 52-week high at $59.28. A break above $57.60 could spark enough buying interest to kick start another price wave higher. Target is $60.50 to $61.10. Recent lows at $55.32 provide support for the triangle, so place a stop below. If the triangle breaks to the downside, more short-term selling could be forth coning. Trendline support is near $52, providing another area to watch for buying opportunities.
Tyco Connectivity (NYSE:TEL)
Tyco Connectivity (NYSE:TEL) has been trending very strong for the last year and half, and is currently trading just below the 52-week high of $61.14. A breakout of a small correction channel may provide advance warning of a run at the high, and potentially beyond. If price moves above $60, another re-test of $61.14 is anticipated. There is minor resistance at $60.40, so the price will need to also climb through that. If the price advances beyond the 52-week high, the next target is $62.50. Once the breakout occurs, a stop can be placed below $59.
The Bottom Line
Consolidations during strong trends provide opportunities to get in on swing trades. This is because, when the consolidation breaks, it provides evidence of the near-term direction of the stock. Risk can be managed by using a stop loss order, placed below the consolidation (in the case of an upside breakout) or inside the consolidation if the breakout is strong and therefore less likely to pull back into the consolidation. The latter increases the reward relative to risk on the trade, but has a slightly higher chance of being prematurely stopped out. By controlling risk and position size, a losing trade shouldn’t have a significant negative impact on overall trading capital.
Disclosure – At the time of writing, the author did not own shares of any company mentioned in this article.

Stocks with the Strongest Uptrends

Commentary

Tickers in this Article: HP, GNW, ETFC, HAR

While the S&P 500 remains in an uptrend, despite more of a sideways pause last week, these four stocks are in “super-trends.” Respecting moving average support levels and continually pushing to new highs, these are stocks to keep on the watch list for buying opportunities.

Helmerich & Payne (NYSE:HP)

Helmerich & Payne (NYSE:HP), which was already in strong trend, has accelerated to the upside in February and March. Since May, the stock has been doing a pretty good job of respecting the 50-day moving average. Therefore, a pullback to the average presents one option for an entry point. A rising trendline intersecting near $90 presents another. If the price falls below the recent low at $96.51, watch for a decline into the trendline. Assuming the uptrend continues, the target will be beyond the high (yet to be determined). If the price drops below $85, a large correction is underway, and can thus be used as a stop. The stop can be moved up as new lows form.
SEE: Beginner’s Guide To MetaTrader 4

Genworth Financial (NYSE:GWN)
Genworth Financial (NYSE:GNW) has seen a strong surge in March, and has more than doubled since the start of 2013. The price has been respecting the 100-day moving average since late 2012. Pullbacks to the average therefore provide a buying opportunity, and the average also aligns with a trend channel. If the price pulls back to the lower portion of the channel/100-day moving average, the top of the channel provides the target. $15 should provide adequate support, so a stop could be placed below there and moved up as new lows form.
E*Trade Financial (Nasdaq:ETFC)
chart
E*Trade Financial (Nasdaq:ETFC) has been flying higher over the last seven weeks, creating a number of support levels which can be used for structuring trades. The 50-day moving average has been providing support, so a pullback to the average provides one potential long entry. A larger support region is between $20 and $19. A drop below $18.86 penetrates a major low, signaling potential problems. This level can therefore be used as a stop, and moved up as higher lows form. If the price pulls back to the entry areas, the target is between $25 and $26.
Harman International (NYSE:HAR)
Harman International (NYSE:HAR) has seen multiple short burst higher followed by extended periods of more sideways movement. This pattern has still resulted in a very strong uptrend. Pullbacks toward the 50-day moving average–just above $100–may provide advantageous pricing, as well the $95 to $90 region which is the site of a former gap higher. Look for a target beyond recent highs with a stop not much below $90.
The Bottom Line
These stocks are currently very strong, and have been for some time. Trading strong stocks is one of the best strategies for trading an overall market uptrend. That said, strength comes and goes. It is still important to wait for favorable entries and control risk. Create a plan for how you will trade the stock, and stick to it. Keep the position size manageable–a single loss shouldn’t have a large negative impact on trading capital.
Disclosure – At the time of writing, the author did not own shares of any company mentioned in this article.

Stocks Close to Triangle Breakouts

Commentary

Tickers in this Article: AAPL, BSX, V, WFM

Triangles are a common chart pattern. Often viewed as a continuation pattern, the breakout direction ultimately determines if the prior trend is continuing or reversing. These four stocks have all experienced strong trends recently, so the breakout direction will help determine if that trend continues or reverses.

Apple(Nasdaq:AAPL)

After a nice run higher through the last half of 2013, Apple(Nasdaq:AAPL) has been consolidating in 2014 below the $575.14 high. A downside breakout occurred on March 14 when the price broke triangle support near $528. Further selling during the week of March 17 will confirm the signal. Place a stop loss above $535 (triangle) or $540 (recent swing high) with a target at $458. The target is attained by taking the height of the pattern and subtracting it from the breakout price. If price reverses course and breaks above $540, it’s an upside breakout and the height of the pattern is added to the breakout price for a target of $605.
SEE: Beginner’s Guide To MetaTrader 4

Boston Scientific(NYSE:BSX)
Boston Scientific(NYSE:BSX) doesn’t have the prettiest triangle, but the consolidation still likely provides a trading opportunity. When the price broke below $13 on March 12 it broke the original triangle support. This trade calls for a target of $11.50 and a stop above $13.80. A bounce on March 14 has created another way to draw the triangle. For the new pattern to break, the price needs to drop below $12.60, with a target at $11.10 and a stop above $13.80. Shorting near the original breakout point of $13 provides a better risk to reward ratio, but goes against the dominant uptrend with little downside confirmation. If the price continues a rally, the upside break occurs at $13.80, providing a target of $15.30 and a stop near $12.60 or $13.
Visa(NYSE:V)
chart
Visa(NYSE:V) is consolidating below a high of $235.50. A downside break occurred on March 13 when the price moved below $223.Target is $201 with a stop above $227.50. The price has also been moving in a small horizontal channel though; waiting for continued selling pressure below the March 14 low at $218.56 will help confirm the downside break. If the price rallies, a break above the recent swing high at $228.39 breaks both patterns, putting the target at $250 with a stop near $220.
Whole Foods(Nasdaq:WFM)
Whole Foods(Nasdaq:WFM) has been in a downtrend since putting in a October high at $65.59. The actual triangle (black lines) has very similar highs and lows, making it more of a range than a triangle. A break below $50.40 indicates the downtrend is continuing. The target is $45.40 with a stop above $55.75. The downside break is a ways away, so if the price breaks above $55.75 first, it signals a further rally. Target is $60.75 with a stop near $50.40. This pattern is not narrowing very much (more range like), so the reward to risk ratio is not ideal. Placing a stop behind behind a recent swing high or low (yet to be determined) following breakout can improve the reward relative to risk.
The Bottom Line
Triangles are a useful chart pattern because they provide an entry, stop loss and target. The main draw back to any chart pattern is false breakouts. A false breakout occurs when a trade occurs in one direction, then proceeds to reverse and break in the other direction, or just fails to trend at all (moves sideways). Keep position size in line with account size and risk tolerance, so if a trade doesn’t work out, very little damage is done to the overall trading account.
Disclosure – At the time of writing, the author did not own shares of any company mentioned in this article.