Technical Patterns: Breakouts

There are many and varied technical patterns that technical analysts take note of when looking for potential breakout trades. These include Triangles, Head and Shoulder patterns, Cup ‘n’ Saucers and Wedges to name just a few. One of my favourite patterns is the triangle. The triangle can be in the form a symmetrical, ascending or descending. The reason I am so fond of them is because I find them to be a very reliable indicator of future action, especially on stock charts.

I have posted examples of charts of some of my trade ideas that are based on triangle or other technical pattern breakouts. This analysis helps me to better time my trade entry on any directional trade for stocks on my watch list and, also, to trade with greater confidence. Directional trading may take the form of either:

  • Stock or Call Option purchase, Put Option selling for bullish breakouts and
  • Put Option purchase for bearish breakouts.

Some of these technical pattern breaks, but not all, came with the added confluence of my own trade entry (TC) signals as well. This gives me added confidence with the directional trade. The charts show the pre and post breakout patterns. (click on the charts to enlarge them).

MCD: this has given a nice $33 move worth 26% for February to July of 2017:

YHOO: Back in January 2017 I Tweeted to watch YHOO for any new triangle breakout.  This was the weekly chart from that period:

YHOO weekly: Feb 2017.

In just 5 months the breakout has given a 30% gain:

YHOO weekly: June 2017.

AAPL: I posted a chart of APPL on Twitter on Jan 31st 2017 showing price action forming up within a triangle pattern. This was the chart from that Tweet:

AAPL weekly: Jan 2017.

The triangle breakout triggered and moved on to give up to $20, or roughly 16%, by April 2017:

AAPL weekly: April 2017.

PCLN: These shots from September 2016 and April 2017 illustrate the advantage of looking for momentum-based trend line breakout trades:

PCLN weekly: Sept 2016.

PCLN weekly: April 2017.

BRK: Back in March 2016 I Tweeted that this looked like a Bull Flag in the making when the share price was $205,550.00! More the pity I couldn’t afford to trade this stock though as the Bull Flag did evolve and the price rallied $53,059.50 to give a weekly close of $258,609.50 as of March 17th 2017.

BRK: March 2016

BRK March 2017

ATVI: Activison Blizzard: a triangle breakout was noted back in late February 2015. This is how the chart appeared then with a weekly candle close just above $23:

ATVIweekly

This is how the chart appeared in late November 2015 where price had rallied up by $14 to $37.51:

ATVIweekly

Oil: this triangle breakdown pattern on Oil is example enough to highlight how these patterns should never be ignored. Price action broke down in October 2014 and fell by almost $40 by early 2015:

Oil as at October 12th 2014:

CLweekly

Oil as at March 6th 2015:

CLweeklyS&P500: This major US stock index has broken out of two different triangle patterns over the last couple of years and both breakouts were stalked and tracked on this site. The first triangle was a symmetrical triangle and this was watched up until the eventual breakout at the end of December 2012. This breakout represented a close and hold above the key 1,400 level as well:

Price continued 200 points higher from the close above 1,400 and eventually formed up into an ascending triangle pattern a few months later
The eventual close and hold above the major 1,600 resistance level was a significant achievement for the index and price continued to rally from there up to the 2,000 level. I am expecting the index to eventually target the 2,500 level:
S&Pmonthly
SKX:  This stock was noted back in Aug 2013 when it made a triangle breakout above the $25 level. This is how the chart of SKX appeared back then:

 

 
The stock in November 2014 had been trading up as high as $64 and this is a gain of over 150%:
SKXweekly
IYT: IYT is the transport ETF and this is one that I monitor closely as it is regarded as a ‘bellwether’ for US stocks. A triangle breakout on this stock has delivered up to a 68% return. I noted back in December 2012 how this ETF was setting up in a triangle pattern and was watching for any potential breakout. The chart is reproduced below:

The breakout came through as a bullish one and this was noted in an update in January 2013. The chart for that time is copied below:

This triangle breakout went on to deliver a 68% return and the chart for October 2014 shows the current status of this trade as ongoing:

IYTweekly

XAO: ASX All Ordinaries Index:I noted back in October 2012 how this index was setting up within a triangle pattern:

This index went on to make a bullish triangle breakout that delivered up to a 27% gain at its peak. This is how the chart appeared as of October 2014:
XAOweekly
MU: Micron Technology: This has been a great earner for me. I had sold $6 puts and was assigned at the end of 2012. I had been trading this leading up to the potential triangle breakout:

I held on to the stock though and only sold out recently at $21. Price has reached up to $25 though and this represents a huge gain of 280%. The chart as of 25/04/14 appears below:

MU daily
MU weekly
MU has moved on now, July 2014, to be up at $34. This represents again of 420% since the initial triangle breakout:
MU daily
MU

CAT: Caterpillar: I noted back in Nov last year how CAT looked set to make a triangle break out. This triangle break has now delivered a 26% move:

This is how the chart appeared back then when I posted in Nov 2013:

This is how the CAT chart appeared as of April 2014:

This was CAT as of July 2014:
CAT

FDX: Fedex: I noted a triangle breakout in January 2013 on Fedex. This technical move has now delivered over 57% . This was how the chart appeared when I posted back on Jan 30th 2013:

This is how the FDX chart appeared in April 2014:
This is how Fedex appeared in March 2015:
FDXweekly
ADBE: Adobe: This has been a stellar stock to trade and I traded this throughout much of 2013 by selling CSNP. I had been tracking this stock as it formed up in a symmetrical triangle and then made a bullish breakout:
ADBE: Fri 11th Jan 2013: shortly after the triangle break:

ADBEearly

ADBE: Wed 12th Feb 2014: this stock has now rallied to yield an 85% gain since the initial triangle breakout. I traded CSNP throughout much of this 2013 rally:

ADBE

ADBE: 3rd March 2014: this has now continued on its bullish run to return over 100% gain:

ADBE

 

ADBE has now delivered a gain of 114% as of July 2014:

ADBEweekly

AA: Alcoa: I was stalking this stock for some time as it formed up into a bullish descending wedge.  I was on the lookout for any bullish break up and out from this pattern which eventually evolved:

AA Monday Oct 14th 2013: before the breakout:

 

 

AA: Jan 29th 2014: after the wedge breakout and the break of the $11 barrier:

AAAA: as at July 2014: I still see the $18 level as the next target here:

AA

X: US Steel: I had been watching this stock for some time as it traded within a descending triangle pattern. These are often bearish continuation patterns but the bottom trend line here was at major support and with the economy taking more of a turn for the better, I had been watching for any bullish breakout. My patience paid off and I am currently in this trade with long Call Options purchased.

X: May 8th 2013: before the breakout:
X: Oct 30th 2013 a few weeks along from the breakout and an increase of 38%.

 

WAG: Walgreen: This stock had been setting up with a bullish pattern of an inverse Head and Shoulder (H&S) pattern. The theory behind these patterns is that the height of the ‘Head’ to the ‘neck line’ is suggested as the amount of move from any potential breakout from the ‘neck line’. The height on this inverse H&S pattern was about $8. Thus, any profit target would be best placed at $8 above the neck line. This would have suggested a target of $59 and this bullish breakout did actually move to $60:

WAG: Walgreen: 13th Sept 2013: Yesterday’s price action broke through the $51 ‘neck line’ of this pattern and printed a new high for the stock. Price has cleared the Ichimoku Cloud as well:

WAG 29th Jan 2014: The bullish inverse H&S evolved in ‘text book’ style and delivered more than the projected $9 move:

WAG

WAG 12th Feb 2014: has now delivered a 25% gain:

WAG

WAG 3rd March 2014: has now delivered 37% gain:

WAG

NUS: Nu Skin Enterprises:This stock made a bullish descending wedge breakout that went on to produce a huge yield of over 170%. I was watching and posting about this stock back in April 2013. The huge gain was realised by late November 2013:

April 2013: NUS just starting to break out of the descending wedge:
NUSdaily
The breakout was confirmed not long after:
NUSdaily2
The breakout actually continued to rally and yielded a 200% gain before reversing:
NUS3

YHOO: Yahoo: I had been tracking YHOO for some time as it rose through an ascending triangle. These are bullish continuation patterns so I was on the lookout for any close and hold above the $20 level. This has been a classic bullish breakout move.

YHOO: Feb 23rd 2013
YHOO Jan 14th 2014. The $40 level was eventually reached and this move up from $20 produced a gain of 100%!
YHOO

BBY Best Buy:  This was another stock trading within a descending triangle pattern. It made a bearish break but then pulled back to go on for a very bullish run.

BBY Jan 30th 2013

BBY Nov 12 2013. The gain here ended up being over 150%.

BBY

NKE: Nike: Another symmetrical triangle break that I stalked and that yielded a big return.

NKE: Jan 30th 2013

NKE: Nov 12th 2013

NKEweekly (1)

CAKE: Cheesecake Factory: A bullish breakout from an ascending triangle pattern. One I had staled for some time.

CAKE: Jan 30th 2013

CAKE: Nov 12th 2013

CAKEweekly1

XLF: Financials ETF. Another bullish ascending triangle break.

XLF: Jan 30th 2013

XLF: Nov 12th 2013. The gain from this triangle breakout was 30%:

XLF

TIF: TIFFANY: This stock had a great year in 2013 increasing by 40% after a triangle breakout:

TIF : Jan 30th 2013

TIF: Dec 5th 2013
TIF weekly1
Other triangle and charting patterns are noted in update pages located in the drop down menu from the tool bar of this blog site.