| Tickers in this article: TXN, NLSN, LPX, NWBI A breakout occurs when the price moves out of a price pattern it has been trading in. A pattern could be a price range, triangle, flag pattern or any other defined shape the price of a stock has moved in. The four stocks below are all moving within price patterns of various size, shape and duration, and are worth watching for a breakout. The breakout alerts traders that a trend may be emerging or continuing.
Texas Instruments Inc. (TXN) gapped higher on October 22 and reached a short-term high of $59.67 on October 23. Since that time the price action has taken on a triangle or pennant formation, with a breakout point of $58. Adding the height ($59.67 - $55.74) of the triangle to the breakout point gives a target of $61.93. If viewed as a pennant, the rally from the October 21 low at $51.81 to the $59.67 short-term high (difference of $7.86) can be added to the low of the pennant ($55.74), giving a target of $63.60. A stop loss order goes just below $55.74, and if the price drops below that it warns of a decline back toward $53, filling the gap.
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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