All day I scan the charts looking for technical patterns to trade. My Trending 123 Pattern Scan powered by Recognia is one useful tool I have to scan the markets quickly, and it is showing two polar opposite technical events for these two communication stocks.
Buy the Bullish Pennant
Click to Enlarge Clearwire Corp. (CLWR) is a provider of 4G wireless broadband—the internet connection that allows you to surf the web on your smartphone without wi-fi. The stock price looks ready for a short-term pop with a bullish pennant that has developed over the past 9 days.
The price seems to be resuming a sharp rally after taking a brief pause. A bullish pennant pattern occurs during a dynamic market rally, representing a brief period of indecision before running off again in the same direction. The pattern consists of two converging trend lines with diminishing volume, and is confirmed when the price breaks through the upper boundary to resume the advance.
Recommendation: Buy CLWR for a $5.60 – $5.90 target.
Short the Megaphone Top
Click to Enlarge Comcast (CMCSA) is a cable and broadband provider that has developed a megaphone top over the past 60 days, making this an intermediate-term trade likely to play out over the next six weeks to nine months.
The recent broadening action tells us that trading has been out of control, but a breakout on the downside suggests we’re starting a more decisive downtrend. With its broadening price swings, the megaphone represents a market that’s unstable. It typically consists of two successively lower lows between three higher highs, and the reversal signal occurs when the price breaks down below the second trough (the lowest lows) as a sign of a more decisive bearish move.
Recommendation: Short CMCSA for a $35.20 – $36.00 target.
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. Trending123 members receive access to the Trending123 Pattern Scan powered by Recognia free as part of their membership. For more information on which service is for you click here.