All day I scan the charts looking for technical patterns to trade, both to the long and short sides. My Trending123 Pattern Scan powered by Recognia is one useful tool I have to scan the markets quickly, and it is showing two technical events in a utility and a natural gas stock that are showing opposite trends in two sub-sectors of energy.
Buy the Upside Breakout
Natural gas company Targa Resources Corp. (NASDAQ:TRGP) has developed an upside breakout pattern over the past 23 days.
The price broke upward out of a trading range that developed around April, suggesting we’re entering a new uptrend. The upside breakout pattern represents a trading range in which prices move sideways between two parallel horizontal lines. It’s often a pause or congestion area within an existing trend though sometimes the breakout results in a reversal to the prior trend. Either way, an upside breakout through the upper resistance line signals an end to the consolidation period and the start of an uptrend.
Recommendation: Buy TRGP for a $73.00 – $73.90 target.
Short the Rounded Top
Southern Co. (NYSE:SO), provider of energy utilities in four Southeastern states, has developed a rounded top over the past 33 days.
In the chart you can see why this pattern is called a rounded top. There has been a gradual shift from an uptrend to a downtrend. The rounded top represents a slow and gradual reversal of the trend from up to sideways to down. Volume diminishes near the bottom as the stock trades within a range and finally bursts as investors become more decisively bearish. While rarer than other reversal patterns and often longer term, rounded tops usually mark a major turnaround.
Recommendation: Short SO for a $43.30 – $43.80 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.