From time to time I like to give readers a heads up on potential trading opportunities. Before considering any trades that I might outline in Chart School, always remember that you must decide for yourself if you like the trade.
One key factor in making that decision will be to decide which side of the trade you believe gives you the highest probability of success. In other words, do you like the short side of the market, or do you like the long side? You don’t necessarily have “know” what side to be on, but it certainly helps to take a stance. So, if you haven’t thought about it, review the overall indices themselves. Take a look at the S&P 500 for example. Is it trending higher or lower? Has it recently broken through a key resistance or support level? Making these decisions ahead of time will help you decide which side of the trade you believe gives you the best opportunities.
NWSA has formed a common price pattern knows as an Ascending Triangle. This pattern is commonly thought of as a bullish pattern (at least when formed during an up trend), meaning that NWSA could be positioning itself for a break higher. However, the stock could just as easily break lower rather than higher. That is why waiting for the breakout, one way or the other, is the preferred, higher-probability trade.
The Tale of the Tape:
NWSA (News Corporation) has formed an Ascending Triangle pattern. A breakout above $18 should signal the stock is moving higher, thus entering a long position would be recommended. However, a break down below the up-trending support line would be an ideal entry for a short position.
No matter what your strategy or when you decide to enter, always remember to use protective stops and you’ll be around for the next trade. Capital preservation is always key!
Christian Tharp, CMT