For investors who use charts and price action to guide their choices, a methodical way to find possible opportunities is important. One method looks for stocks that show both good basic technical condition and a helpful price pattern, indicating a possible breakout may be near. This method depends on two specific scores from ChartMill: the Technical Rating, which reviews the general trend and momentum of a stock, and the Setup Quality Rating, which examines how closely a stock is moving together and if a clear entry and exit point is present. By concentrating on securities that rate well in both areas, technical investors try to join the next part of a confirmed uptrend from a place of comparative strength and clear risk.
A recent search using this method has pointed to Ameren Corporation (NYSE:AEE) as a candidate deserving more examination. As a regulated utility holding company providing electric and natural gas services in Missouri and Illinois, Ameren works in a typically stable sector. However, its recent price activity shows a more active story from a technical view.
Reviewing the Technical Base
The first part of this breakout method is a good Technical Rating, which confirms the stock is in a positive trend before a possible move. Ameren’s Technical Rating of 7 shows a firm, positive technical setting. A close look at the ChartMill Technical Analysis report shows the specific positives supporting this score:
- Trend Agreement: Both the long-term and short-term trends for AEE are rated as positive. This agreement across time periods is a good sign, showing continued buying interest.
- Moving Average Backing: The stock is trading above all its main simple moving averages (20, 50, 100, and 200-day), and each of these averages is itself in a rising pattern. This layered, positive arrangement of moving averages frequently acts as a changing support structure.
- Relative Location: AEE is now trading in the higher part of its 52-week range, which goes from $91.77 to $106.73. While it is not ahead of the wider market, it does better than about 54% of all stocks, its place within its own range shows continuing strength.
This mix of elements is exactly what the Technical Rating is made to find. A score of 7 or more selects for stocks that are not just recovering but are in a clear uptrend, an important requirement for a high-likelihood breakout trade.
Reviewing the Setup Quality
A good trend by itself is not a signal to buy, entering a stock that has just made a big, stretched move can be dangerous. This is where the Setup Quality Rating becomes important. It finds times of coming together or "close" trading inside the wider trend, which can come before the next continued price move. Ameren does well here with a Setup Rating of 9.
The technical report points out why the setup looks positive:
- Coming Together Pattern: Over the last month, AEE has been trading in a band between about $98.92 and $105.69. It is now staying near the top of this band, suggesting it is gathering for a possible move.
- Clear Support and Resistance: The analysis finds a definite support area from $95.79 to $103.61, made by a meeting of trendlines and moving averages. Just above the present price, a resistance area sits between $104.88 and $106.35. These clear levels allow for exact trade planning.
- Supportive Measures: The report notes recent positive signals, including interest from big participants (as seen by the Effective Volume measure) and a recent "Pocket Pivot," a price/volume pattern often linked with gathering.
A high Setup Rating like AEE's shows the stock is pausing to gather force after a rise. For a breakout planner, this coming together gives a clear plan: a possible entry point just above the found resistance to confirm the breakout, with a stop-loss order set below the nearby support area to control risk.
A Possible Trade Plan
Based on this review, the ChartMill report proposes a specific, automated trade setup. It suggests an entry at $106.36 (a buy-stop order set just above the resistance area) with a stop-loss at $101.56 (below the recent coming together low and support). This plan would limit the theoretical worst loss to about 4.5% on the trade. It is important to note that this is a computer-made example based only on technical levels, investors must always do their own review, think about basic factors like coming earnings, and change position size to match their personal risk comfort.
Finding More Chances
The breakout setup found in Ameren Corporation is only one example made by a methodical search. For technical investors looking for a daily list of stocks that meet similar conditions of good trends and high-quality coming together periods, the Technical Breakout Setups search is a helpful beginning point. You can run this search yourself to see the present market chances here.
Disclaimer: This article is for information only and does not make investment advice, a suggestion, or an offer or request to buy or sell any securities. The review is based on technical data and automated scoring models. All investing has risk, including the possible loss of principal. Past results do not show future results. Always do your own research and think about talking with a qualified financial advisor before making any investment choices.
