As I looked over the charts today using the Trending123 Pattern Scan powered by Recognia, I saw some interesting patterns going on in two stocks that are always in the news: Zynga (NASDAQ:ZNGA) and Blackberry (NASDAQ:BBRY). Traders love to overanalyze every move these companies make, but in my opinion, the charts tell a clearer picture.
Buy the Symmetrical Continuation Triangle
Click to Enlarge ZNGA has developed a symmetrical continuation triangle over the past 28 days—a bullish sign for this up-and-down trendy stock.
In this pattern, the price breaks upward out of a consolidation period (see the trend from April to now), suggesting a continuation of the prior uptrend. As you can see on the chart, the symmetrical continuation 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 should break out above the upper trendline with a noticeable increase in volume, confirming the pattern as a continuation of the prior uptrend.
Recommendation: Buy ZNGA for a $3.85 – $3.95 target.
Short the Diamond Top
Click to Enlarge BBRY has developed a diamond top pattern over the past 43 days, which could signal a drop of over 30% if the reversal is confirmed.
The price seems to have reached a top, showing signs of reversal as it has broken downward after a period of uncertainty or consolidation. The diamond top pattern began during an uptrend as prices created higher highs and lower lows in a broadening pattern from March to today.
Then the trading range gradually narrowed after the highs peak and the lows started trending upward. When the price breaks downward out of the diamond’s boundary lines, which it is very close to doing today, it marks a significant reversal to a new downtrend.
Recommendation: Short BBRY for an $11.20 – $12.00 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.