For technical investors looking to find stocks ready for their next rise, a common method involves selecting securities that show both technical health and a constructive price pattern. This method tries to find leaders during times of pause, just before a possible breakout. One way to apply this is by using specialized scores such as the ChartMill Technical Rating and Setup Quality Rating. The Technical Rating measures the general condition and direction of a stock, while the Setup Rating evaluates the quality of its present pause, searching for narrow trading ranges and distinct support levels. Joining these filters, looking for stocks with high marks in both areas, can reveal possible breakout candidates. A recent scan using this method has identified FRANKLIN RESOURCES INC (NYSE:BEN) as a stock deserving closer examination from a technical viewpoint.
Technical Strength: A Firm Base
The base of any breakout setup is a stock showing fundamental technical health, which points to institutional backing and a current positive direction. FRANKLIN RESOURCES INC (BEN) performs well here, receiving a ChartMill Technical Rating of 8 out of 10. This firm score rests on several main parts that match the aims of the breakout strategy.
An examination of the technical report shows the reasons for this rating:
- Trend Agreement: Both the near-term and long-term directions for BEN are marked as positive. This agreement across periods is a vital indicator of continued momentum, lowering the chance that a near-term move is only a brief rally.
- Relative Performance: Inside the competitive Capital Markets industry, BEN performs better than 82% of its 238 competitors. This firm relative performance shows the stock is a leader in its field, a trait often wanted in breakout candidates.
- Position vs. Market: The stock is now trading close to its 52-week high. While the wider S&P 500 is also near highs, BEN's performance matches the market's positive near-term direction, instead of falling below it.
- Moving Average Support: The stock price is trading above important moving averages, including the 20-day ($25.00) and 50-day ($23.72) SMAs, which are both increasing. This formation points to steady buying and offers a structure of changing support below the price.
This mix of factors addresses the first question for a technical trader: "Is this a stock I want to own?" The high Technical Rating indicates BEN is in a verified uptrend and showing market-leading action, giving a firm background for a possible breakout move.
Setup Quality: The Pause Before the Advance
A firm trend by itself is not a signal to buy; entering during a steep climb often results in buying at a high. The second, vital part of the strategy finds when to buy, which is where the Setup Quality Rating becomes key. This score searches for consolidation, a halt or narrow trading range inside the uptrend that can gather force for the next rise. BEN performs well here too, having a near-ideal Setup Rating of 9.
The technical report lists the traits that make the present pattern noteworthy:
- Specific Trading Range: Over the last month, BEN has been pausing inside a range between about $23.66 and $26.25. The stock is now trading near the top of this range, indicating it is testing the upper limit of its pause.
- Distinct Support and Resistance: The analysis finds a concrete support area between $24.84 and $25.11, made from a mix of moving averages and trendlines. Just above the present price, a resistance area lies between $26.00 and $26.03. These specific levels give clear points for entry and risk management.
- Lower Volatility & Positive Indicators: The report mentions "lower volatility while prices have been pausing," a typical sign of building pressure. Also, a recent "Pocket Pivot" signal, a price increase on higher-than-normal volume, suggests accumulation during this quiet time.
From this setup, the analysis proposes a possible trade plan: an entry order just above the resistance at $26.04 (a buy-stop) with a protective stop-loss order set below the support area at $24.83. This establishes a risk of about 4.65% on the trade. For a technical investor, this high Setup Rating shows that BEN is not only trending upward, but is doing so in a managed, formed way that presents a measurable opportunity.
Conclusion
FRANKLIN RESOURCES INC (BEN) offers an example of using a combined technical and setup filter. Its high Technical Rating of 8 verifies it is a sector leader in a maintained uptrend, while its outstanding Setup Rating of 9 spots a well-formed pause pattern with clear, close levels for action. This combination indicates the stock may be getting ready for a possible breakout from its recent trading range.
It is vital to recall that technical scans are a beginning for more study, not an assurance of results. Investors should always perform their own research, think about coming company events like earnings, and make sure any trade fits their individual risk management rules.
Interested in finding more possible breakout setups? You can use the same scanning method with the Technical Breakout Setups screen to see an updated list of candidates each day.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer or solicitation to buy or sell any securities. The analysis presented is based on technical data and should not be the sole basis for making any investment decision. Always conduct your own research and consider consulting with a qualified financial advisor before making any investment.
