For investors focused on technical analysis, identifying stocks that are both fundamentally sound and ready for a near-term price move is a constant goal. One method involves screening for stocks that show good underlying technical condition while also forming a consolidation pattern, pointing to a possible breakout. This method uses two proprietary metrics from ChartMill: the Technical Rating, which measures a stock's overall trend strength, and the Setup Quality Rating, which evaluates the condition of its current price pattern for a possible entry. Stocks with high scores on both metrics are frequently seen as good options for technical breakout strategies.
HA Sustainable Infrastructure Capital, Inc. (NYSE:HASI) recently appeared on such a scan, presenting a profile that technical investors may find interesting. The company, which invests in climate solutions like renewable energy and sustainable infrastructure, is showing a chart configuration that suggests it may be getting ready for its next important move.
A Sound Technical Base
The center of any breakout strategy starts with a stock that is already in a good trend. A high Technical Rating shows the stock is a market leader with positive momentum, making it more probable to keep its upward path after a breakout. HASI's Technical Rating of 8 out of 10 confirms it works from a position of condition.
A look at the full technical report shows several supportive factors:
- Positive Long-Term Trend: The long-term trend is seen as positive, which is a key base for any long-biased setup, particularly when the wider S&P 500 is in a negative trend.
- Good Relative Performance: Over the past year, HASI has done better than 79% of all stocks in the market and 84% of stocks within the Financial Services industry, showing notable relative strength.
- Supportive Moving Averages: The stock is trading above its key rising moving averages (SMA50, SMA100, SMA200), which often serve as dynamic support levels during pullbacks.
A Good Setup for a Possible Entry
While a strong trend is needed, it is not enough for a best entry. A stock can be high in price, making a new purchase risky. This is where the Setup Quality Rating is important, as it finds stocks that are consolidating or pulling back in a normal way, offering a clearer entry point with defined risk. HASI's high Setup Rating of 9 points to a favorable pattern.
The technical report lists the details of this setup:
- Consolidation Near Highs: The report states that "prices have been consolidating lately" and that "a pullback is taking place, which may present a nice opportunity for an entry." This action lets the stock reduce overbought conditions and form a base for its next rise.
- Clear Support and Resistance: The analysis finds a definite support zone between $35.35 and $36.38, made by a mix of trendlines and moving averages. Just above, a resistance level is at $37.07. This creates a specific range, allowing for exact placement of entry and stop-loss orders.
- Supportive Volume Signal: A recent "Pocket Pivot" signal was seen, which is a price/volume pattern often linked with accumulation by institutional investors, adding confirmation to the setup.
A Specific Trading Plan
Based on this analysis, the report proposes a sample trading plan. An entry could be thought about on a breakout above the $37.07 resistance level, using a buy-stop order at $37.08. To control risk, a stop-loss order could be set just below the identified support zone at $35.34. This plan would set a risk of about 4.7% on the trade itself, allowing for exact position sizing based on an investor's total portfolio risk tolerance.
Finding Other Options
HASI shows the kind of opportunity that systematic technical screening tries to find. Investors searching for similar possible breakout setups in technically sound stocks can run the screen themselves. The Technical Breakout Setups screen filters the market daily for stocks with a Technical Rating and Setup Quality Rating of 7 or higher, giving a selected starting point for more study.
Disclaimer: This article is for informational purposes only and does not constitute investment advice, a recommendation, or an offer to buy or sell any security. The trading setup mentioned is an automatically generated example for educational illustration and is not a suggestion to execute a trade. All investing and trading involves risk, including the potential loss of principal. Always conduct your own due diligence, consider your personal financial situation and risk tolerance, and consult with a qualified financial advisor before making any investment decisions. Past performance is not indicative of future results.