MICHAELS (MIK) formed a huge head-and-shoulders-bottom. The formation is on the cusp of breakout. In general, H&S formations are very reliable patterns. There could be failures but for the majority of cases the pattern breaks out as expected (in this case, to the upside). Additionally, there is a breakout of the OBV line that signals bullishness.
A couple of things to keep in mind: the RSI is in overbought level and there is a bearish divergence between price and RSI. Also, because volume didn't decrease during the length of the formation, the pattern is not as strong as it would be if the right shoulder had less volume than left shoulder or head or if volume was U-shaped, which according to Bulkowski are ideal types of volume for this pattern. However, these are not nearly as strong trading signals as the huge H&S pattern that has formed.
If the stock breaks out above the H&S neckline, check if the breakout happens on high volume. Although not necessary to confirm the strength of the pattern, a breakout on high volume provides some reassurance that the price will continue moving up.
There are different ways to trade this pattern (always wait for confirmation before placing a trade):
1. You can place a stop-buy right above the H&S neckline to capture as much as possible of the upside move with a stop loss right below the neckline. If your buy order is triggered and you happen to be stopped out of the trade later, you minimize your downside. Some authors recommend a stop below the right shoulder but I would avoid as much downside as possible and jump back in if price breaks above the neckline again. This approach matches my trading style; you can place the stop loss on a different level depending on your risk tolerance. However, there is very little downside to selling for a very small loss below the neckline since you can always jump back in if the stock closes above the neckline.
2. You can wait for a throwback to the neckline after the breakout and buy if that level holds. Keep in mind a throwback to test the neckline is a common pattern (happens 50% of the times according to Bulkowski) but it doesn't have to happen. Stop loss strategy should be the same as above.
Upside potential is measured by taking the distance between the lowest point in the head and the neckline and plotting it above the neckline (using arithmetic scale, not log). In this case the target is about $26, which is about 92% profit. There is a strong level at around $28 as well, which could be a second target if the price continues moving up after hitting $26.
***If you get anything out of this TA, please like and follow for future updates and more TA. Thanks a lot!***
***THE IDEAS SHARED HERE ARE MY OPINION. THIS IS NOT FINANCIAL ADVISE TO PLACE TRADES. PLEASE DO YOUR OWN RESEARCH AND ANALYSIS BEFORE BUYING/SELLING STOCKS.***
A couple of things to keep in mind: the RSI is in overbought level and there is a bearish divergence between price and RSI. Also, because volume didn't decrease during the length of the formation, the pattern is not as strong as it would be if the right shoulder had less volume than left shoulder or head or if volume was U-shaped, which according to Bulkowski are ideal types of volume for this pattern. However, these are not nearly as strong trading signals as the huge H&S pattern that has formed.
If the stock breaks out above the H&S neckline, check if the breakout happens on high volume. Although not necessary to confirm the strength of the pattern, a breakout on high volume provides some reassurance that the price will continue moving up.
There are different ways to trade this pattern (always wait for confirmation before placing a trade):
1. You can place a stop-buy right above the H&S neckline to capture as much as possible of the upside move with a stop loss right below the neckline. If your buy order is triggered and you happen to be stopped out of the trade later, you minimize your downside. Some authors recommend a stop below the right shoulder but I would avoid as much downside as possible and jump back in if price breaks above the neckline again. This approach matches my trading style; you can place the stop loss on a different level depending on your risk tolerance. However, there is very little downside to selling for a very small loss below the neckline since you can always jump back in if the stock closes above the neckline.
2. You can wait for a throwback to the neckline after the breakout and buy if that level holds. Keep in mind a throwback to test the neckline is a common pattern (happens 50% of the times according to Bulkowski) but it doesn't have to happen. Stop loss strategy should be the same as above.
Upside potential is measured by taking the distance between the lowest point in the head and the neckline and plotting it above the neckline (using arithmetic scale, not log). In this case the target is about $26, which is about 92% profit. There is a strong level at around $28 as well, which could be a second target if the price continues moving up after hitting $26.
***If you get anything out of this TA, please like and follow for future updates and more TA. Thanks a lot!***
***THE IDEAS SHARED HERE ARE MY OPINION. THIS IS NOT FINANCIAL ADVISE TO PLACE TRADES. PLEASE DO YOUR OWN RESEARCH AND ANALYSIS BEFORE BUYING/SELLING STOCKS.***
Comment:
Breakout happening at the moment. My buy order was triggered. Stop loss at $13 (I want to minimize losses as much as I can). Good luck on your trades.
Comment:
Up almost 7% this morning. If you are not in yet, I would wait for a throwback to the neckline or start a small position here (1/3 of your budget for this stock) in case it doesn't move back down and start dollar cost averaging either the way down back to the neckline if that happens, or the way up.
Comment:
If there is a throwback I will most certainly add more to my position using the same stop loss strategy I described above.
Comment:
Up 9.5%!
Trade closed manually:
MACD and RSI in overbought territory + the quick sell off made me sell my shares for 10%. Not bad for a two day swing trade. I will jump back in if it retraces further.
Trade closed manually:
This is also the 1 fib extension level, so a pause here is on the books anyway:
Comment:
Watching the .236 fib retracement level, around $14.11. I would be willing to start scalling in at that point depending on what momentum indicators show. At the moment, RSI is in overbought zone and curling down:
Comment:
On the 1hr chart we can see the 14-ema is giving some support at the moment but I don't think it will hold much longer since the MACD signal crossed below the MA and RSI is moving down:
Comment:
We still have about 4hrs to the close today but the chart is currently printing a bearish engulfing candle pattern, which is not good. If the current candle doesn't react and move up I believe a revisit to the neckline may be very possible. I am still not in.
Comment:
21-ema holding on the hourly chart. That's why I love TA:
Comment:
Price sitting exactly on the $14.11 fib retracement for the past 10 min :)
Comment:
Bearish engulfing candle on the daily. This signals a possible retracement:
Comment:
The .236 fib retracement level, around $14.11, is now resistance: