High-Flying Pennant
Monday
and possibly Tuesday, I’ll be watching closely for a breakout from a pennant
in Photronics
(
PLAB |
Quote |
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PowerRating). Let’s look at some clues that might hint at the
direction of the breakout.
Photronics (PLAB) has made a nice bull move off
its lows in the $15 range, after a retest and false-bear breakout (A) in mid-December. After a rally to the next major resistance area in the
range of $23-$24, price found support at just below its 50-day MA, at
around 19. You’ll also note that this was an approximate 50% retracement of
the the rally from mid-December.
Price gapped down on December 21 then began
another surge which made a new 10-month high of 35 3/8 on January
17. Today showed an inside day (lower high and higher low) and the smallest
daily range in six days.
All signs point to a breakout — but in what
direction?
Pennants formed
after uptrends are usually bullish, however, traders looking to go long or
add to their long position would want to see the breakout accompanied by
volume. Other traders might wait for the upside breakout to retest (and not
violate) the top of the triangle before taking a position.Â
In either case, price retracing into the
triangle would represent a failed signal. At minimum, a stop-loss would be
placed just beneath the lowest low of the flag, around $30.
Have a good weekend,
Â
Eddie