When you think of the fashionistas who would wear loud patterns and body-hugging clothes from small-cap American Apparel (APP) and the outdoorsy types attracted to Teva and Sanuk sandals from Deckers Outdoor (DECK), a past Trade of the Day stock, you’re likely thinking of very different people—so you might be surprised to find out that these stocks are both showing the same technical pattern right now. Actually, it’s not unusual for stocks in a particular sector to trade together, even in the same technical patterns.
Click to EnlargeMy Trending123 Pattern Scan powered by Recognia has identified a symmetrical continuation pattern in both APP and DECK.
In both stocks, the price has broken upward out of a consolidation period, suggesting a continuation of the prior uptrend. In a symmetrical continuation triangle pattern, you can see 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 out above the upper trendline with a noticeable increase in volume, confirming the pattern as a continuation of the prior uptrend.
The length of the inbound trend before the actual pattern develops—183 days in American Apparel and 56 days in Deckers Outdoor—is often cited as a predictor of how long the pattern will take to play out. You can see the inbound trend represented by gray lines on the charts, while the pattern itself is in blue. The symmetrical continuation pattern itself developed over 51 days in American Apparel and 29 days in Deckers Outdoor.
In both of these stocks an intermediate-term bullish trade is projected (six weeks to nine months).
The target price for small-cap APP is $2.55 – $2.65 and the target range for DECK is $62.25 – $64.00
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.