STX: A beautiful breakout to be bought
SHORT TERM POSITIVE
STX broke out in July 2016 and again yesterday on the back of stronger than expected earnings. The volume on breakout day (7.8x average daily volume) makes it a very significant move - One of the main invitations to buy the shares even after they have propelled upwards. Yesterday's shooting star could be construed as a bearish reversal, but it is no real concern as this formation is not statistically a very reliable indicator. However, it could spell that some consolidation could be expected in the short term, and after yesterday's big move.
MEDIUM AND LONG TERM COMPELLING AS WELL
On the long term-chart below, please note that yesterday's close also marks the completion of a very visible reverse head and shoulders. This could be an additional positive indicator.
LEVELS AND RISK REWARD?
We would like to buy the shares today after the breakout IN HALF POSITION. This will give us the fire power to double down on an eventual consolidation. We would be happy to keep owning the shares, as long as the breakout is valid, above 38 (most recent breakout level). Our target price is derived from both the H&S pattern and the main channel from which the stock broke out in July - Both incidentally lead us to the same target at $54.30/Share, making this number both compelling and credible. This is equivalent to a positive R/R of 2.5x.
Long at 42.67
Target 54.30
Stop 38.00
STX broke out in July 2016 and again yesterday on the back of stronger than expected earnings. The volume on breakout day (7.8x average daily volume) makes it a very significant move - One of the main invitations to buy the shares even after they have propelled upwards. Yesterday's shooting star could be construed as a bearish reversal, but it is no real concern as this formation is not statistically a very reliable indicator. However, it could spell that some consolidation could be expected in the short term, and after yesterday's big move.
MEDIUM AND LONG TERM COMPELLING AS WELL
On the long term-chart below, please note that yesterday's close also marks the completion of a very visible reverse head and shoulders. This could be an additional positive indicator.
LEVELS AND RISK REWARD?
We would like to buy the shares today after the breakout IN HALF POSITION. This will give us the fire power to double down on an eventual consolidation. We would be happy to keep owning the shares, as long as the breakout is valid, above 38 (most recent breakout level). Our target price is derived from both the H&S pattern and the main channel from which the stock broke out in July - Both incidentally lead us to the same target at $54.30/Share, making this number both compelling and credible. This is equivalent to a positive R/R of 2.5x.
Long at 42.67
Target 54.30
Stop 38.00
Comment:
STX is now in a bullish configuration on all time frames, and visibly overbought in the short and medium time frames. The more courageous will hold on to this momentum stock, which is getting closer to the high of the "shooting star" formation at 46.68, while upping the stop-loss to $42.00/Share, thus making it nearly a "free ride" for investors. Others will want to take profits here, at the risk of missing further upside...
Comment:
Getting closer to 54.30 target. Keep holding and raise the stop loss from 42 to 44. For those who followed this recommendation early on, this is now a "free ride" as the stop loss is above the entry point.
Trade closed: target reached:
Still slightly above our stop-loss but wary of the market, which might be consolidating. Take profits.