1 Stock to Buy, 1 Stock to Short: Auto

Try this pairs trade in a well-established auto stock and a small-cap

   

All day I scan the charts looking for technical patterns to trade, both to the long and short sides. My Trending 123 Pattern Scan powered by Recognia is one useful tool I have to scan the markets quickly, and it is showing two technical events in these automotive stocks for traders to take advantage of.

Buy the Ascending Continuation Triangle

4 9 13 las 300x188 1 Stock to Buy, 1 Stock to Short: Auto
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Lentuo International
(NYSE:LAS) is a Beijing-based automobile retailer that has developed an ascending continuation triangle pattern in its stock over the past 41 days.

The increasingly higher lows and constant highs within this pattern tell us that buyers are more aggressive than sellers, confirmed by a breakout through a resistance level to signal a continuation of the prior uptrend. An ascending triangle, with its increasingly higher lows and constant highs, indicates that buyers are more aggressive than sellers. The pattern typically forms because a supply of shares is available at a certain price, represented by the upper flat line. When the supply depletes, the shares quickly break out from the top trendline and move higher.

Recommendation: Buy LAS for a $1.89 – $1.97 target, with a $1.22 stop.

Short the Descending Continuation Triangle

4 9 13 gm 300x189 1 Stock to Buy, 1 Stock to Short: Auto
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General Motors
(NYSE:GM) is an American auto manufacturer that has developed a descending continuation triangle in its stock over the past 19 days.

The increasingly lower highs and constant lows within this pattern tell us that sellers are more aggressive than buyers, confirmed by a break down through a support level to signal a continuation of the prior downtrend. A descending continuation triangle, with its increasingly lower highs and constant lows, indicates that sellers are more aggressive than buyers. The pattern typically forms because a demand for shares is available at a certain price, represented by the lower flat line propping the price up. But when the supply depletes, the shares quickly break down below the bottom boundary line and move lower.

Recommendation: Short GM for a $25.80 – $26.10 target, with a $29.59 stop.

 

InvestorPlace advisor John Lansing tracks the charts all day and offers expert technical analysis in his day trading, options and trading services: Power Trading at the Open, Parabolic Options and Trending123.  For more information on which service is for you click here.

 


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