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Screening to find breakout opportunities

By

Gary Christie

on

September 6, 2019

The S&P 500 is testing key resistance at 2950 inside a short-term trading range with key support at 2820. The 50 and 200-day moving averages are just outside these key levels.  The question remains, do we break above or below the consolidation range?

Using Trading Central’s technical event screener, I searched for bullish classic patterns in stocks inside the S&P 500,  that are outperforming the broad market so if a breakout to the upside happens, bullish momentum should accelerate. I filtered for large cap stocks that have listed options available; this screens out junior, more volatile stocks. Using the columbine capital quant rank, a proprietary stock ranking model from 1 to 10, 1 being the highest ranking, I only wanted stocks with a rating of 2 or better. Finally, I added a filter for stocks that have a potential to gain at least 15% or more based on the measured moved of the bullish classic pattern. One company name peaked my interest.

Micron (MU: NASDAQ) confirmed a classic bullish Symmetrical Continuation Triangle pattern. Prices have broken upward out of a consolidation period, suggesting a continuation of the prior uptrend.

Micron Breakout

A bullish Symmetrical Continuation Triangle pattern shows two converging trendlines as prices reach lower highs and higher lows. Volume diminishes as the price swings back and forth between an increasingly narrow range reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks out above the upper trendline with a noticeable increase in volume, confirming the pattern as a continuation of the prior uptrend.  

The symmetrical triangle pattern yields a measured move target into the $51.75 to $53.50 range with an ideal trailing stop at $41.44 according to Trading Central’s algorithm.


The investment ideas presented here are for information only.  They do not constitute advice or a recommendation by Trading Central in respect of the investment in financial instruments. Investors should conduct further research before investing. Learn more.

Gary Christie

Head of North American Research
Gary has over 15 years in financial markets. Prior to joining TC, he served as an equity & derivatives specialist with TD Bank and Bank of America. Gary is regularly quoted in Bloomberg News, conducts many education and market outlook webinars for investment institutions all over the world and has been a guest speaker at the New York Traders Expo.
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