There’s no doubt that people are doing business online more than ever before. Both hardware-based and cloud-based data and networking companies are reaping the benefits…some more than others.
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 data computing stocks for traders to take advantage of.
Buy This Bottom Triangle
Click to EnlargeEmulex Corp. (NYSE:ELX) is a company that provides networking and storage solutions to almost all of the Fortune 1000 companies. Its stock has developed a bottom triangle over the past 80 days.
The price seems to have reached a bottom, showing signs of reversal as it has broken upward after a period of uncertainty or consolidation. A bottom triangle shows two converging trendlines as prices reach lower highs and higher lows. Volume diminishes as the price swings back and forth between an increasingly narrow range reflecting uncertainty in the market direction. Then well before the triangle reaches its apex, the price breaks above the upper trendline with a noticeable increase in volume, confirming this bullish pattern as a reversal of the prior downtrend.
Recommendation: Buy ELX for an $8.10 – $8.40 target, with a $6.24 stop.
Short This Megaphone Top
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 and out of control. 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 AKAM for a $24.75 – $26.50 target, with a $38.71 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.