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 these stocks for traders to take advantage of.
Buy the Bullish Continuation Wedge
Click to EnlargeCafePress Inc. (NASDAQ:PRSS) is an online store that allows you to design and sell your own merchandise—and it seems to be doing pretty well based on the chart, which has developed a bullish continuation wedge over the past 20 days.
After a temporary interruption, the uptrend in PRSS is set to continue. A bullish continuation wedge represents a temporary interruption to an uptrend, taking the shape of two converging trendlines that are both slanted downward against the trend. During this time the bears attempt to win over the bulls, but in the end the bulls triumph as the break above the upper trendline signals a continuation of the prior uptrend.
Volume should diminish as the pattern forms.
Recommendation: Buy PRSS for a $7.40 – $7.80 target.
Short the Descending Continuation Triangle
Click to EnlargeGeekNet (NASDAQ:GKNT) is a media and e-commerce company that provides products and services for well…geeks. Products for sale on their popular Thinkgeek.com site range from Star Trek bathrobes to a map of Middle-Earth. Unfortunately, the company may need to enlist the help of a finance nerd to salvage their stock, which has developed a descending continuation triangle over the past 31 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 GKNT for a $12.20 – $12.60 target. This pattern got started very quickly, but you should still be able to capture about 6% of downside from current levels.
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.