Watch These Stocks For Breakouts Right Now Tickers in this article: JCP, QGEN, ARMK, SNN For multiple months the buyers and sellers have been butting heads in these stocks, with neither getting the upper hand. The charts clearly depict this tug-of-war, as the price channels sideways in a continually narrowing range. Eventually one side will win, and those on the losing side will be forced out, further pushing the price in the winner's direction. For these stocks a breakout could occur in either direction. The breakout can signal a new entry--buy on a breakout higher or short sell on a breakout lower. If already in a position, the breakouts are still relevant. A breakout lower signals to sell a long position or hold a short position, and a breakout higher signals to hold a long position and exit a short trade.
J.C. Penney Company, Inc. (JCP) 
J.C. Penney Company, Inc. (JCP) has stalled near the bottom of the rising trend channel. Since May the overall price action has been sideways, as the price tests of the bottom of a rising channel which extends back to December. If the price breaks below $8.15 it indicates another downward move could be commencing, in line with the long-term downtrend. Initial price target is $7.15, with an additional target at $6.65, which is a possible support region. A move above $8.95 signals an upside breakout and likely rally into the $10 region. $10.50 is a more aggressive target which aligns with the top of the current rising trend channel.
Qiagen NV (QGEN) 
Qiagen NV (QGEN) is also moving in a tightening price area since the start of May. $25.25 marks a resistance level, and a break above indicates a rise to $26.80. This target is based on adding the height of the price area (since start of May) to the breakout price. A larger pattern which extends back to late 2013 shows the price could hit resistance at $26.25 to $26.50 though--the price has been very hesitant when making new highs over the last 20 months. A drop below $24.20 creates a breakout to the downside, providing a price target of $22.65.
Aramark (ARMK) 
Aramark (ARMK) has been making lower swing highs and higher swing lows since February. Connecting these price swings reveals a triangle pattern. A drop below $30.75 breaches triangle support, providing a price target of $28.25. If the price reaches the price target, it then becomes a potential buying opportunity based on the longer-term uptrend. A rally above $32 triggers an upside breakout and a target of $34.50. The upside breakout aligns with the longer-term uptrend.
Smith & Nephew PLC (SNN) 
Smith & Nephew PLC (SNN) has been relatively stagnant since early March. The high in April was $35.97, and since then the price has been making lower swing highs. Throughout June the price respected a support area at, and just above, $33.55. Look for a breakout there; a drop below provides a target of $30.85. This is based on subtracting the price range from March 3 onward from the breakout level. An upside breakout occurs at $35.60, with a price target of $38.30. This is still below the December high of $39.80, which is likely to be a strong resistance area.
The Bottom Line One of the main problems with breakouts is that the price may move slightly above or below a breakout level, only to move back into the range a short time later. This is called a false breakout. It happens frequently. Limit losses when a false breakout occurs; don't cling to a trade that failed to do what you expected it to. Breakout trading is rarely a strategy where you will win most of the trades; usually it involves a number of small losses before capturing a bigger winner.
Refine Your Financial Vocabulary Gain the Financial Knowledge You Need to Succeed. Investopedia's FREE Term of the Day helps you gain a better understanding of 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.
| 
No comments:
Post a Comment