For investors who use charts and price action to guide their choices, finding stocks that are both technically sound and ready for an advance can take much effort. A systematic process involves looking for two main proprietary measures: a high Technical Rating, showing a stock's basic trend condition, and a high Setup Quality Rating, showing the stock is moving in a narrow band, possibly preparing for a breakout. This pairing tries to sort for chances where a stock with a good upward path is resting, giving a more distinct entry point with clear risk.
BANC OF CALIFORNIA INC (NYSE:BANC) recently appeared from such a search, showing a profile that technical investors may find interesting.
Technical Strength: A Base of Momentum
The heart of this method first looks for stocks showing sound technical condition, as a solid trend gives the directional leaning for a possible breakout trade. Banc of California’s ChartMill Technical Rating of 9 out of 10 puts it strongly in this group. This high number comes from several supportive parts listed in the technical report:
- Long-Term Trend: The long-term trend for BANC is seen as positive, a key base for a breakout setup. This indicates the stock is in a continued upward stage on a wider timeframe.
- Relative Performance: The stock has done better than 82% of all other stocks over the last year, showing notable relative strength. It is also trading in the higher part of its 52-week range.
- Moving Average Alignment: The stock is trading above its main moving averages (20, 50, 100, and 200-day SMAs), and all these averages are in upward arrangements. This layered, upward alignment of support levels is a standard sign of a sound uptrend.
This mix of a positive long-term trend, solid relative performance, and aligned moving averages gives the "which stock" answer for technical investors—BANC shows the basic momentum wanted for a continued move higher.
Setup Quality: The Pause Before the Advance
A solid trend by itself is not a reason to buy; entering after a fast rise brings the chance of a quick decline. This is where the Setup Quality Rating is key, answering the "when to buy" question by finding times of consolidation. Banc of California gets a top-level Setup Rating of 9, meaning it is in such a stage.
The technical report notes the conditions that make this high-grade setup:
- Lowered Volatility & Consolidation: Prices have been moving in a set band over the last month, with volatility lessening. This coiling action often comes before a clear price move.
- Clear Support Area: The analysis finds a major support area between $19.33 and $20.11, made by a meeting of trendlines and moving averages. A well-set support zone allows for the sensible placement of a stop-loss order, which is needed for risk control.
- Limited Overhead Resistance: The report states there is very little resistance above the present price, meaning a breakout could meet little selling pressure on its way higher.
- Institutional Interest: An extra positive point is more activity from large players in recent days, as seen in volume analysis, which can be a confirming sign of accumulation.
A Possible Trading Plan
From this analysis, the technical report describes a sample breakout setup. It proposes a possible entry point just above a recent high at $20.83, with a stop-loss order set below the found support area at $19.40. This would set the first risk on the trade at about 6.9%. It is important to stress that this is an explanatory example made from the technical factors; investors must always do their own study and adjust entry, exit, and position size to their personal risk comfort and plan.
Finding Like Chances
Banc of California shows the kind of chance the Technical Breakout screen is made to find: a stock with shown momentum taking a pause in an organized consolidation. For investors wanting to see the present market for like setups, new picks are found each day. You can see the newest results by going to the Technical Breakout Setups screen.
Disclaimer: This article is for information only and is not investment advice, a suggestion, or an offer to buy or sell any security. The trading setup talked about is an automatic, explanatory example and not a personal suggestion. All investing and trading has risk, including the possible loss of principal. Investors should do their own study, think about their money situation and risk comfort, and talk with a skilled money professional before making any investment choices. Past results do not show future outcomes.
