For technical investors, finding stocks that are in a solid uptrend and may be ready for their next advance is an important strategy. One technique involves looking for securities that mix sound basic technical condition with a helpful price pattern, indicating a possible breakout is near. This method searches for stocks with high proprietary "Technical" and "Setup" ratings, trying to find chances where momentum and timing come together.
Enterprise Products Partners LP (NYSE:EPD), a leading company in midstream energy infrastructure, currently shows this type of profile. Based on a recent technical analysis report, the partnership's units display traits that could interest investors using this breakout method.
A Base of Technical Condition
The heart of this strategy first needs a stock to be in a verified and sound uptrend, which is measured by a high Technical Rating. ENTERPRISE PRODUCTS PARTNERS gets an 8 out of 10 on this measure, pointing to a good technical base. This rating is backed by a few main points from the technical report:
- Positive Trend Agreement: Both the long-term and short-term trends for EPD are seen as positive. This agreement across different periods is a helpful signal, pointing to continued buying interest instead of a brief rally.
- Solid Momentum Compared to Market: EPD is now trading close to its 52-week high, a signal of condition. Importantly, this is better than the wider S&P 500, which stays below its own highs, showing EPD is acting as a leader.
- Helpful Moving Averages: The unit price is trading above all its main simple moving averages (20, 50, 100, and 200-day), and each of these averages is in an upward pattern. This ordered arrangement of rising support levels is a standard trait of a sound uptrend.
This technical condition is important for the strategy because it raises the chance that any following breakout will happen within the existing trend, not as a false signal in a weak or falling stock.
A Favorable Pattern for a Possible Advance
While a solid trend is needed, it is not enough for a best entry. A stock that has moved up quickly may be overstretched and likely to decline. This is where the Setup Quality rating matters, as it finds stocks that are pausing after gains and forming a base for a possible next step. EPD also gets an 8 on this measure, indicating a good pattern.
The technical report notes the parts that add to this high setup rating:
- Recent Price Pause: The report says that prices have been pausing lately, with the units trading between about $35.36 and $38.22 over the last month. This time of rest after a rise lets the stock ease overbought states and can form a clear support level.
- Clear Support and Resistance: The study finds a definite support area just below the current price, near $37.21, and a close resistance level at $37.58. Well-marked limits are needed for handling risk, as they give sensible levels for setting stop-loss orders and finding breakout signals.
- Lowered Volatility: The report says that volatility has been lowered during this pause. Falling volatility during a stop in an uptrend can sometimes come before a notable price move.
The existence of a favorable pattern is what changes a solid stock into a possible trade candidate. It gives a tactical entry point (a breakout above resistance) with a specified area for risk control (a stop below support).
A Specific Technical Situation
Bringing these parts together, the technical report for EPD describes a particular situation. With the unit price near the top of its recent range and facing close resistance at $37.58, a clear move above this level could be seen as a breakout, possibly signaling the restart of the uptrend. The nearby support area gives a sensible place to set a protective stop-loss order, making a clear risk/reward structure for a technical trade. You can see the full technical view in the detailed ChartMill report for EPD.
Locating Related Chances
ENTERPRISE PRODUCTS PARTNERS shows the kind of chance technical breakout screens are made to find: a basically solid trend combined with a tactical entry pattern. Investors searching for related possible patterns in the present market can often screen for stocks fitting these conditions.
For a daily updated list of securities displaying solid technical ratings and favorable setup patterns, you can see the Technical Breakout Setups screen on ChartMill.
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 technical analysis and trade situations discussed are from proprietary models and past data, which are not promises of future results. Investors should do their own study and think about their personal money situation and risk comfort before making any investment choices.