IP Aiming for a 10% Break Out
[1] IP has been trading along an uptrend line, from June 2012 to June 2013, reaching as high as $48.68.
[2] However from June 2013 to now, price has been consolidating sideways between $43 to $50, for about 15 months. This is essentially a very clear Rectangle chart pattern, which indicates a pause in the upward trend in [1], with an intention to resume the uptrend in the future.
In other words, price has been consolidating and "storing energy" for 15 months, for an eventual break out.
[3] We observed that currently that price is attempting to break out to the upside. One may question why the current attempt to break out will succeed, when so many attempts have failed in the past 15 months.
If we look closely at the pink box, we see a brief period of support buying at 48.80s with price ending at $50.62 on 31 Oct 2014. This makes it different from previous attempts where price was sharply sold down when reaching around $50.00.
Therefore we project that the $48.80 support buying at [3] will lead to a breakout of the 15 Month Rectangle pattern of [2] and resume the upward trend.
Breakout Condition:
When price can convincingly close above 50.65.
Stop Loss:
Below $48.80
Taking Profit:
The theoretical Take Profit Target will be $56.00, based on the height of the rectangular pattern.
However, given the long period of consolidation, there's a good probability of price exceeding the theoretical target.
A more advanced method will be to Take Profit by Oscillator, where we can take profits when the Relative Strength Index (RSI,14, Close) is close to reaching 70.00.
Leaving Some Money on the Table:
Should the profit targets be successfully met, we may also consider leaving a small position open and catch the general drift of the uptrend. This will be suitable for those who don't mind holding positions and stomaching reduction in marked to market profits, so as to potentially capture higher price moves in the longer term.
Risk:
There is always a risk that this is yet another false break out.
Hence the tight stop loss below $48.80.
References:
More about Rectangle Chart Pattern> babypips.com/school/middle-school/important-chart-patterns/rectangles.html
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[2] However from June 2013 to now, price has been consolidating sideways between $43 to $50, for about 15 months. This is essentially a very clear Rectangle chart pattern, which indicates a pause in the upward trend in [1], with an intention to resume the uptrend in the future.
In other words, price has been consolidating and "storing energy" for 15 months, for an eventual break out.
[3] We observed that currently that price is attempting to break out to the upside. One may question why the current attempt to break out will succeed, when so many attempts have failed in the past 15 months.
If we look closely at the pink box, we see a brief period of support buying at 48.80s with price ending at $50.62 on 31 Oct 2014. This makes it different from previous attempts where price was sharply sold down when reaching around $50.00.
Therefore we project that the $48.80 support buying at [3] will lead to a breakout of the 15 Month Rectangle pattern of [2] and resume the upward trend.
Breakout Condition:
When price can convincingly close above 50.65.
Stop Loss:
Below $48.80
Taking Profit:
The theoretical Take Profit Target will be $56.00, based on the height of the rectangular pattern.
However, given the long period of consolidation, there's a good probability of price exceeding the theoretical target.
A more advanced method will be to Take Profit by Oscillator, where we can take profits when the Relative Strength Index (RSI,14, Close) is close to reaching 70.00.
Leaving Some Money on the Table:
Should the profit targets be successfully met, we may also consider leaving a small position open and catch the general drift of the uptrend. This will be suitable for those who don't mind holding positions and stomaching reduction in marked to market profits, so as to potentially capture higher price moves in the longer term.
Risk:
There is always a risk that this is yet another false break out.
Hence the tight stop loss below $48.80.
References:
More about Rectangle Chart Pattern> babypips.com/school/middle-school/important-chart-patterns/rectangles.html
Like it, Share it, Follow it~
Trading View: BreakOutArtist
StockTwits: stocktwits.com/BreakOutArtist
Twitter: twitter.com/BrkOutArtist
Facebook: facebook.com/brkoutartist
TradeHero: BreakOutArtist
Explore TradingView for more Trade Ideas> tradingview.com/?a_aid=breakoutartist
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