For investors who use charts and price action to inform their choices, a methodical way to spot possible opportunities is important. One such technique looks for stocks that are both showing technical strength and creating a clear pattern, indicating they might be ready for their next notable price movement. This method centers on two specific scores from ChartMill: the Technical Rating, which judges the general condition and direction of a stock, and the Setup Quality Rating, which examines if the stock's present price action is settling into a possible point to enter. Using these filters together, traders try to locate stocks with good technicals that are not stretched too far but are instead gathering force for a potential price surge.
CNX Resources Corp (NYSE:CNX), an independent natural gas development and production company, recently appeared from such a search. A close technical analysis report shows a notable situation for technical investors, as the stock displays high scores in both key areas.
Technical Strength: A Base of Momentum
The heart of this method starts with finding stocks in a verified upward trend, as a solid primary trend raises the chance that a price surge will keep going the same way. CNX Resources receives a complete ChartMill Technical Rating of 10, putting it with the market's best from a technical view. This highest score comes from multiple areas of firmness:
- Continued Long-Term Trend: The long-term trend for CNX is seen as good. This is supported by the stock trading notably above its important moving averages, like the 50-day ($39.32), 100-day ($38.21), and 200-day ($34.83) simple moving averages, all arranged in upward slopes.
- Better Relative Performance: During the last year, CNX has done better than 81% of all stocks in the market. This firm relative performance shows money is entering the stock even with wider market changes.
- Steady Price Increase: The technical report mentions a "good and steady sequence of increasing prices." This is seen in its performance numbers, with the stock higher by about 28% over the past twelve months and 25% over the last six months.
This firm technical foundation is important because it implies the stock is being bought and that any price surge from a period of sideways movement is more probable to happen within an existing upward move instead of a move against the trend.
Setup Quality: The Pattern for a Possible Entry
A firm trend by itself is not a sign to purchase; entering a stock that has just jumped can be dangerous. The second part of the method is the Setup Quality Rating, which tries to find times of sideways movement or narrow trading bands that frequently come before a stock's next upward phase. CNX gets an 8 out of 10 on this measure, showing a good-quality setup is present.
The analysis indicates a stock that has been moving sideways after its recent rises. After hitting a 52-week high of $43.62, CNX has declined and is now trading in a band. This activity has let the price get nearer to its short-term moving averages, forming a possible area where it might stop falling. The report specifically notes:
- Clear Support and Resistance: A definite resistance area is seen between $42.15 and $42.62. On the other side, several levels of support are found below, with the closest important area between $39.32 and $39.65, made from a mix of trendlines and moving averages.
- An Organized Trade Idea: From this pattern, the technical analysis proposes a possible trade idea. An entry might be thought about on a price move above the resistance area at about $42.63, with a stop-loss order set below the support area around $39.31. This sets the trade's possible loss at about 7.8%.
- Sideways Movement Inside an Uptrend: The setup description ends by stating that "a decline is happening, which could give a good chance for an entry." This is the standard situation the search aims to find: a technically firm stock pausing, possibly giving a lower-risk moment to enter for the next part of its upward trend.
Conclusion and Next Steps
The pairing of a complete Technical Rating and a high Setup Quality Rating makes CNX Resources a stock to watch for technical investors using a price surge method. It shows the needed momentum and relative performance while presently trading in a pattern that allows for a specific entry and exit point. As usual, this technical situation should be reviewed next to fundamental factors and wider market conditions.
For traders wanting to locate similar chances, the process that found CNX can be repeated each day. The Technical Breakout Setups screen sorts the market for stocks with a Technical Rating of 7 or more and a Setup Rating of 7 or more, giving a selected list of possible stocks for more review.
Disclaimer: This article is for information only and is not investment advice, a suggestion, or an offer to buy or sell any security. The analysis uses technical data and automated scoring models, which are not promises of future results. Always do your own research, think about your financial position and risk comfort, and talk with a qualified financial advisor before making any investment choices.