For technical investors looking to find stocks ready for their next rise, a common method uses two main ideas: trend strength and entry timing. The aim is to locate stocks that are both in a verified, good uptrend and are also coming out of a time of sideways movement, providing a more distinct and possibly less risky entry point. This method removes stocks that are only recovering in a downtrend and those that have moved too far in their advance that a decline is probable. A useful method to apply this is by using specialized measures like ChartMill's Technical Rating and Setup Quality Rating, which give numbers to these specific traits. A recent search for these "technical breakout patterns" has pointed to FLOWSERVE CORP (NYSE:FLS) as a stock that deserves more attention.
A Base of Technical Health
The first part of a solid breakout pattern is a firm basic trend. A stock must show continued buying interest and do better than similar stocks to be seen as a real leader. ChartMill's Technical Rating, a number from 0 to 10, is made to gauge this specific condition. A rating of 7 or more usually means a stock is in a clear uptrend.
Flowserve Corp. does very well here, having a nearly ideal Technical Rating of 9. Looking at the full technical report shows the reasons for this high number:
- Trend Direction: Both the recent and longer-term trends for FLS are marked as positive, a strong pairing that indicates momentum is moving together across various time frames.
- Moving Average Position: The stock's price is above all its main simple moving averages (20, 50, 100, and 200-day), and each of these averages is also in an upward pattern. This layered order is a standard indicator of a sound, trending stock.
- Comparative Performance: FLS is doing better than 87% of all stocks in the market over the last year and 83% of other stocks in the Machinery field. This comparative gain shows the stock's rise is not only due to a general market increase but a mark of particular investor trust.
This firm technical base is important because it raises the chance that any move out of sideways action will keep going in the direction of the main trend, upwards.
A Favorable Pattern for Entry
A firm trend by itself is not a signal to buy; getting into a stock that has just jumped can be hazardous. The second part is spotting a favorable pattern, a time when the stock's price movement becomes tighter, instability lessens, and a clear area of holding is formed. This sideways action lets the stock "pause" before its next possible move. ChartMill's Setup Quality Rating, also on a 0-10 scale, gives a number to this formation.
Flowserve shows a notable pattern, also receiving a 9. The technical report lists the parts forming this positive structure:
- Sideways Action and Holding: Over the last month, FLS has moved in an area between about $69 and $75. It is currently in a period of sideways action near the center of this area, having lowered its recent instability. More significantly, a specified holding area has developed between $69.20 and $71.02, made by a meeting of moving averages and trend lines.
- Large Investor Activity: The report states that "large players showed an interest for FLS in the last couple of days," as seen by the Effective Volume measure. Gathering by large investors during a sideways phase can be a positive indicator.
- Pocket Pivot Indicator: A recent "Pocket Pivot" indicator was seen, a formation that shows upward price change on greater volume than recent lower days, hinting at basic buying interest even during a flat phase.
This high Setup Rating is what changes FLS from a firm stock into a possible trading chance. It gives a technical reason for setting a sensible entry point above the sideways area and a protective stop-loss point below the noted holding zone.
Combining the Parts: A Technical View
When joined, Flowserve's high numbers create a view of a stock that is both firm and ready. The very good Technical Rating verifies it is a market leader in an uptrend, while the very good Setup Rating indicates it is coming out of a time of rest. For a technical trader, this pairing tries to answer the two important questions: "Is the trend in my favor?" and "Is this a good moment to enter it?"
The automatic study inside the report proposes a specific trading plan based on these technical points, suggesting an entry just above the recent barrier near $72.05, with a stop loss set below the holding zone around $69.19. This establishes a clear, quantifiable risk measure, which is a fundamental part of orderly technical trading.
Locating Other Possible Breakouts
The process that found Flowserve Corp. can be used in a regular way across the market. For investors wanting to see a new list of stocks that fit similar conditions of firm trends and favorable patterns, new options are produced each day. You can view the present results of the Technical Breakout Setups search here.
Disclaimer: This article is for information only and is not investment guidance, a suggestion, or an offer to buy or sell any security. The technical study and any described patterns are based on automatic measures and past information, which are not promises of future results. Investors should do their own study, think about their personal risk comfort, and talk with a qualified financial advisor before making any investment choices.
