1 Stock to Buy, 1 Stock to Short: Wholesalers

Symmetrical continuation patterns can lead to a bullish or bearish outcome

   

All day I scan the charts looking for technical patterns to trade. My Trending 123 Pattern Scan powered by Recognia is one useful tool I have to scan the markets quickly, and it is showing two polar opposite technical events for these two wholesale company stocks.

Bullish Symmetrical Continuation Triangle Pattern

3 20 13 omi 300x192 1 Stock to Buy, 1 Stock to Short: Wholesalers
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Owens & Minor
(NYSE:OMI) is a healthcare supply company that  has developed a bullish symmetrical continuation triangle pattern over the past 37 days.

A symmetrical triangle pattern is relatively easy to identify. In addition, triangle patterns can be quite reliable to trade with very low failure rates. There is a caution concerning trading these patterns, however. As mentioned previously, a triangle pattern can be either continuation or reversal patterns. Typically, they are continuation patterns. To achieve the reliability for which the triangle is well known, technical analysts advise waiting for a clear breakout of one of the trendlines defining the triangle.

A symmetrical triangle shows two converging trendlines. One is ascending, and the other is descending – creating a sideways symmetrical triangle. The formation occurs because prices are making both lower highs and higher lows.

The general rule is that prices should break out somewhere between three-quarters and two-thirds of the horizontal width of the formation.

Recommendation: Buy OMI for a $33.70 – $34.20 target, with a $30.29 stop.

Bearish Symmetrical Continuation Triangle Pattern

3 20 13 hlf 300x190 1 Stock to Buy, 1 Stock to Short: Wholesalers
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Herbalife
(NYSE:HLF) is a supplement and fitness product company that has developed a bearish symmetrical continuation triangle pattern over the past 200 days.

A bearish symmetrical continuation triangle shows two converging trendlines. The lower one is ascending, and the upper one is descending. The formation occurs because prices are reaching both lower highs and higher lows. The pattern will display two highs touching the upper (descending) trendline and two lows touching the lower (ascending) trendline.

This pattern is confirmed when the price breaks out of the triangle formation to close below the lower (ascending) trendline.

Look for a region of support or resistance around the target price. A region of price consolidation or a strong support and resistance line at or around the target price is a strong indicator that the price will move to that point.

Recommendation: Short HLF for a $12.00 – $17.00 target, with a $41.66 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.  For more information on which service is for you click here.


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