Happy New Year and I bid all of you a very profitable 2015 ahead. Here’s my first Break Out Trading Idea for 2015.
[1] Price for ABBV has been trading along a gentle and steady upwards channel, from April 2014 to Nov 2014. Current price action has broken above the upper channel line.
In other words, price was gently bullish and now shows intention to become very bullish.
[2] Next I would like to draw your attention to the RSI (14) indicator.
You will note the RSI low at [2a] corresponds to a price of $52.50 and the next RSI low at [2b] matches a higher price of around $64.50.
In other words RSI(14) is reaching oversold levels at a much higher price level, which indicates a bullish signal.
[3] Current price pattern is potentially a classic wave pattern, with Impulse Wave 1 and Retracement Wave 2 defined. If price breaks out on the upside, it is likely to form Impulse Wave 3 (strongest wave).
We can only confirm this from hindsight, however we simply cannot rule out this possibility.
[Projection] From [1] and [2] we project that price is likely to break out higher and potentially form Wave 3 of the Elliott 5 wave pattern.
Long Entry Condition> Any time from now as long as price stays above 67.00
Stop> Below $64.00
Take Profit Method 1> When price is close to reaching $80.00 Take Profit Method 2> When RSI(14) is close to reaching 77.0000
Time Limitation> All long positions should be closed by 24 Feb 2015. If the break out move is genuine, Price should reach the Take profit levels by 24 Feb 2015.
Risk: There is a risk that new market information, available during the Earnings Release on 30 Jan 2015, may negatively affect the price action.
There is also a risk that this is a false break out where price will face strong resistance at $69.00 levels resulting in no breakout momentum.
[References]
Using Support and Resistance Levels of Relative Strength Index> Technical Analysis for the Trading Professional by Constance Brown, Chapter 1: Oscillators Do Not Travel between 0 and 100.
As usual, excellent analysis, I wish you posted more.
BreakOutArtist
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Thank you Eran~!
I wish I could post more too.
My current job is quite demanding~
Please take note that the entry condition has not being met yet~!
eran.arad
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Yes, I am only planning to take this stock if the stock returns to 67 and close above it and enter with half the usual size with stocks and options: options are quite cheap compared to the opportunity IMO.