ADT Corp: Here Comes Another Charge in ADT Stock!

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Home security company ADT Corp (NYSE:ADT) has already come through for us, as a trade setup discussed on Feb. 6 hit its price target a couple of weeks later. Now, after a couple of weeks of consolidation, ADT stock again looks ready to move higher and get its next up-leg under way.

beat the bell stock investing adviceToday, we’ll discuss the areas of support you should focus on.

On Feb. 6, I discussed what was a bullish technical picture that had ADT moving off its 2014 price lows in a slow but steady manner. A quick recap:

After its September 2012 initial public offering, ADT stock quickly rallied for six months, but by March 2013 ran out of steam as the post IPO honeymoon wore off, which is a fairly classic way in which new IPOs trade. In March 2014 ADT Corp had finally bottomed and slowly began to move higher, with an important higher low having formed in December.

ADT Stock Charts

The rally since early February that I was looking for previously has now also pushed ADT stock past its diagonal resistance line from the early 2013 highs, which positions ADT even more positively in the bigger picture.

adt stock weekly
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Zooming in on the daily chart, we see that the entire price action since summer 2014 can be labeled a so-called inverse head-and-shoulders pattern, with the blue bubbles representing the left shoulder, head and right shoulder. My trade idea from Feb. 6 focused around a breakout move past the horizontal black neckline, which then quickly gave way toward my $40 price target.

After reaching the price target, ADT then began to consolidate and form what may be looked at as a bullish flag pattern, which now looks to be resolving higher again and should ultimately move well past the $40 area. This brings me to two important points:

  1. Healthy stocks rise with consolidation phases (pauses) in between.
  2. From a swing trading perspective, the highest probability of a move is the first 5% of a new swing, once a bottom has been confirmed.

adt stock daily
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Note that last Friday, March 13, ADT stock had an intraday selloff that retested the horizontal resistance (now support) line, which also roughly coincided with the rising 50-day simple moving average (yellow line). The stock then quickly turned around and closed the day marginally higher, leaving behind a bullish reversal day at an important confluence support area.

Over the past two trading days, ADT stock began breaking out of the bull flag pattern (two black parallels), which barring a quick bearish reversal now promises to see the stock move into the low $40s.

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Download Serge’s trading plan in the Essence of Swing Trading e-book here. As of this writing, he did not hold a position in any of the aforementioned securities.

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Article printed from InvestorPlace Media, https://investorplace.com/2015/03/adt-stock-price-charts/.

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