For investors who use technical analysis to find possible trades, the process often focuses on two main questions: which stock to buy and when to buy it. A structured way to answer these questions involves looking for stocks that are both technically sound and forming a positive price pattern. This technique finds securities in a clear uptrend that are also pausing, indicating they might be ready for their next upward move. By joining a measure of general technical condition with a score for pattern quality, traders try to find breakout possibilities within the market's leading stocks.
ALPHATEC HOLDINGS INC (NASDAQ:ATEC) recently appeared from this kind of screening process, showing a profile that justifies more examination from a technical viewpoint. The company, a maker of spinal fusion technology and surgical products, seems to be showing features that technical investors frequently look for.
A Base of Technical Soundness
The main filter in a breakout screen looks for stocks with solid and continuing upward momentum. This is important because buying into a clear trend improves the chance of a good trade versus trying to buy a declining stock or find a low in a downtrend. Alphatec’s technical base, as shown in its ChartMill Technical Report, is very sound.
- Top Technical Rating: The stock gets a best score of 10 out of 10 for its technical rating. This score combines multiple time period reviews, including long-term and short-term trends, relative performance, and moving average positions.
- Strong Trend Position: Both its long-term and short-term trends are rated as positive, showing united bullish momentum across different time frames. The stock trades above important moving averages (50-day, 100-day, and 200-day), which are all moving upward.
- Market and Group Outperformance: Possibly more significant is its relative performance. The report states that ATEC is doing better than 97% of all stocks in the market over the last year and 98% of similar companies in the Health Care Equipment & Supplies group. This type of relative performance is a sign of market leadership, an important quality for stocks expected to maintain an uptrend.
The Pattern: Pause Before a Possible Breakout
While technical soundness shows which stock could be a candidate, the pattern quality deals with when to think about an entry. A stock in a strong uptrend can be risky to buy if it has moved too far too fast. The preferred situation is to find such a stock taking a break, or pausing, in a narrow range, which can gather energy for its next rise. Alphatec currently shows this action.
- High Pattern Quality Score: The stock has a pattern rating of 9 out of 10. This high score points to a time of lower volatility and price pause, which often comes before a clear move.
- Clear Support and Resistance: The technical report notes that ATEC has been trading between $19.33 and $22.44 over the last month, and it is now placed in the middle of this range. This makes a clear support area below (near $20.64) and a clear resistance level above. A move above the recent range high could mark the beginning of a new upward stage.
- Positive Technical Indicators: The pattern review also mentions recent accumulation signals, including activity from large investors and a "Pocket Pivot" pattern, a bullish price and volume sign that often happens within a pause. These elements add to the confidence in the quality of the base being built.
Combining the Technical View
For a technical trader, the mix of a top technical rating and a high pattern score is notable. It indicates Alphatec is not only one of the more sound stocks in the market from a trend view but is also giving a possible entry point after a time of rest. The clear support levels give a reasonable area to set a protective stop-loss order, aiding in risk control if the expected breakout does not happen.
It is important to state that the automated review proposes a specific entry point above a recent high with a stop below support. Traders should always do their own review to see if these levels match their personal risk comfort and plan, particularly given the stock's higher-than-normal volatility.
Finding Other Ideas
The method that found ALPHATEC HOLDINGS INC as a candidate can be used in a structured way to discover new ideas each day. For investors wanting to see a current list of stocks now showing both high technical and pattern ratings, the Technical Breakout Setups screen offers a changing starting point for more study.
Disclaimer: This article is for information only and is not investment advice, a suggestion, or an offer to buy or sell any security. The review is based on technical data and automated scoring models, which can change. All investing and trading has risk, including the possible loss of principal. Always do your own research and think about talking with a qualified financial advisor before making any investment choices.
