Western Refining Corp. (WNR) and HollyFrontier Corp. (HFC) are both showing strong technical patterns that could be a sign of additional upside ahead. Try one or both as buys if the patterns are confirmed.
Diamond Bottom in Western Refinining
Click to Enlarge The price for WNR seems to have reached a bottom, showing signs of reversal as it has broken upward after the period of uncertainty or consolidation that we’ve seen from April to now.
Diamond patterns like this one usually form over several months in very active markets. Volume remains high during the formation of this pattern.The pattern begins during a downtrend as prices create higher highs and lower lows. Then the trading range gradually narrows after the highs peak and the lows start trending upward. When the price breaks upward out of the diamond’s boundary lines, it marks a significant reversal to a new uptrend.
Recommendation: Buy WNR for a $37.10 – $38.00 target
Bottom Triangle in HollyFrontier
Click to Enlarge HFC is showing signs of reversal as it has broken upward after a period of uncertainty or consolidation. The bottom triangle pattern 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.
Technical analysts pay close attention to how long the pattern takes to develop to its apex. The general rule is that prices should break out – clearly penetrate the upper trendline – somewhere between three-quarters and two-thirds of the horizontal width of the formation. The break out, in other words, should occur well before the pattern reaches the apex of the triangle. The closer the breakout occurs to the apex the less reliable the formation.
Then well before the triangle reaches its apex, the price breaks above the upper trendline with a noticeable increase in volume, confirming this bullish pattern as a reversal of the prior downtrend.
Recommendation: Buy HFC for a $56.50 – $58.00 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.