Last time we looked at a simple pullback play off support. This time we are going to look at a great wedge breakout, which resulted in 10% returns in just 3 trading days.
Remember that these case-studies are to see if stock trading can really be this easy.
While you might not always see such immediate results, the answer is yes! Technical analysis allows us to execute trades only when a stock has made some sort of confirmation. This drastically reduces the risk of trading.
You can see the below and after charts below…
With this setup, we can clear see the upward trend aligning with a solid resistance ceiling above. Along with MACD looking to crossover, and the RSI in bullish territory, a break above the resistance (roughly $54.50) would signify a buy order with a stop somewhere below the new buy entry. There’s really nothing more to it.
Based on the length from the bottom of the wedge to resistance our price target is estimated to be 7 points above resistance (54 – 47 = 7).
The after picture results in a swift 10% or 5 point move. This breakout was confirmed with high volume and MACD moving higher. Remember that volume plays an important role in justifying the strength of a certain move.
With the following gap up, our stop is moved higher to around $57 to make sure we capture profits. Our price target still stands around $61 (7 points from breakout).
So there you have it. A combination of simple indicators and patterns allows us to accurately execute trades only when the stock is ready to move. You can check out more patterns, skills, case-studies, and other technical analysis-focused educational material over at Chart Pattern Manifest.