For investors who use charts and price action to guide their choices, a methodical way to find possible trades is important. One approach is to look for stocks that are both technically sound and making a constructive price pattern, a pairing that can point to a high-probability breakout chance. This method centers on two specific metrics from ChartMill: the Technical Rating, which judges the general condition and direction of a stock, and the Setup Quality Rating, which checks if the stock is consolidating in a manner that gives a defined, lower-risk entry point. The aim is to find leading stocks that are resting before their next possible move up.
A recent scan using this method has identified AngloGold Ashanti PLC (NYSE:AU) as a stock showing this kind of formation. As a major global gold producer with operations in Africa, the Americas, and Australia, AngloGold Ashanti’s stock has been a strong performer, and the technical data indicates its momentum may continue.
Judging Technical Strength
The base of this breakout method is first confirming a stock is in a definite, lasting uptrend. This is why the Technical Rating is important, as it measures the force of a stock’s trend across various timeframes and compared to the wider market. A high score shows a stock is a market leader, not just having a short-lived rise.
AngloGold Ashanti receives a perfect Technical Rating of 10, putting it in the group of the most forceful stocks from a trend viewpoint. The detailed technical report notes several foundations of this force:
- Trend Agreement: Both the near-term and longer-term trends are scored as positive, a strong pairing that shows agreement across different time periods.
- Notable Relative Performance: The stock’s yearly gain is better than 98% of all other stocks in the database, and it does better than 91% of others in the Metals & Mining industry.
- Price Level: The stock is trading close to its 52-week high, confirming the force of the current trend.
- Moving Average Backing: The stock price is trading above all main moving averages (20, 50, 100, and 200-day), and each of these averages is itself in a rising pattern, pointing to wide buying support.
This solid technical foundation is necessary for the method because it raises the chance that any breakout from a consolidation will keep going in the direction of the main trend, upward.
Checking the Setup Quality
A forceful trend by itself is not a buy signal; buying a stock that is "overbought" can result in quick declines. The Setup Quality Rating deals with the "when" to buy by finding times of consolidation or tightening price action. A high score implies the stock is gathering energy, giving a more defined area for a stop-loss and a possible entry point on a breakout.
AngloGold Ashanti shows a Setup Quality Rating of 8, meaning a positive pattern is present. The technical report mentions several main features that add to this score:
- Lower Volatility & Consolidation: Prices have been consolidating in a range between about $81.65 and $93.85 over the last month, letting the stock absorb its earlier gains.
- Defined Support: The analysis finds a clear support area just below the current price, from $87.72 to $89.16. This area, made by a combination of trendlines and moving averages, gives a reasonable level for controlling risk.
- Positive Indicator: A recent "Pocket Pivot" signal was seen, which is a volume-based indicator often linked to accumulation by bigger investors.
This setup is important for the method because it allows for a planned trade idea. The consolidation sets a resistance level to watch for a breakout, while the found support area gives a concrete level to set a protective stop-loss order, clearly setting the trade's risk.
A Possible Trade Plan
From this analysis, a technical plan appears. The ChartMill report proposes a possible entry on a breakout above the recent consolidation high at $93.86, with an initial stop-loss set below the support area at $87.71. This sets a risk of about 6.55% on the trade. It is important to note that this is an automated example for demonstration; investors should always adjust entry, exit, and position size to their personal risk comfort and verify the setup matches their own chart analysis.
Locating Comparable Chances
The pairing of a perfect Technical Rating and a high Setup Quality Rating makes AngloGold Ashanti a significant candidate for technical investors watching for breakout patterns. For those wanting to search the market for similar formations daily, the Technical Breakout Setups screen is made exactly for this use. You can run this screen yourself here to see the present list of qualifying stocks.
Disclaimer: This article is for information only and does not make up investment advice, a suggestion, or an offer to buy or sell any security. The analysis is built on automated technical measures and should not be the only ground for an investment choice. Always do your own research, think about your financial position and risk comfort, and talk with a qualified financial advisor before making any investment. Past results are not a guide to future results.
