Click to EnlargeWell, it looks like Words with Friends hasn’t quite had its last hurrah yet. In my scan of the market using the Trending123 Pattern Scan powered by Recognia, I came across a very interesting pairs trade in the online stock space.
In both stocks, the price has broken upward out of a consolidation period, suggesting a continuation of the prior uptrend. A symmetrical continuation triangle shows two converging trendlines as prices reach lower highs and higher lows.
Click to EnlargeVolume 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 out above the upper trendline. If you’re looking to trade this pattern in either of the stocks, watch for a sharp increase in volume at the same time as the breakout from the triangle’s apex. Without the volume spike, the pattern is not nearly as reliable.
Recommendation: Buy FB for a $34.00 – $35.50 target, with a $25.97 stop. Buy ZNGA for a $4.15 – $4.35 target, with a $2.86 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. 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.