For investors who use charts and price action to guide their choices, a methodical way to find possible trades is important. One such technique looks for stocks that are in a solid technical uptrend and also moving in a narrow pattern, indicating a possible breakout may be near. This plan uses two main proprietary measures from ChartMill: the Technical Rating, which judges the general condition and trend of a stock, and the Setup Quality Rating, which judges the condition of its present narrow pattern. By concentrating on securities that rate well in both areas, technical traders try to find chances where a solid core trend is resting, possibly giving a good risk-reward entry point for the next move higher.
A recent search using this method has pointed to Ionis Pharmaceuticals Inc. (NASDAQ:IONS) as a candidate showing these traits. The biotech company, a frontrunner in antisense technology with a group of marketed medicines such as SPINRAZA and WAINUA, is now showing a notable technical view that calls for more attention from a chart-focused viewpoint.
A Base of Technical Condition
The main screen in a breakout search is a high Technical Rating, which confirms the stock is in a verified and good uptrend instead of only moving up in a downtrend. IONS does very well here, having a nearly perfect Technical Rating of 9 out of 10. This number is based on a base of solid price action across several time periods.
- Trend Agreement: Both the near-term and longer-term trends for IONS are rated as positive, a strong mix that shows continued buying interest.
- Moving Average Backing: The stock's price is above all its important simple moving averages (20, 50, 100, and 200-day), and each of these averages is also in a rising arrangement. This layered agreement of support levels is a typical mark of a solid uptrend.
- Performance Compared to Market: IONS is showing very good relative condition. It has done better than 95% of all stocks over the last year and is in the top 15% of its biotechnology industry group. Now trading near its 52-week high, its performance matches the wider market's positive near-term trend.
This solid technical condition, explained in the full ChartMill Technical Report, gives the basic "which stock" answer for traders, marking IONS as a market frontrunner with momentum.
A High-Condition Setup for a Possible Breakout
While a solid trend is needed, it is not enough for a perfect trade entry. Buying into a stretched move has the chance of a quick decline. This is where the Setup Quality Rating is very important, answering the "when to buy" question by finding narrow patterns. IONS also gets a 9 on this measure, showing it is in a good spot for a possible breakout.
- Narrow Pattern and Lower Volatility: After a large rise, the stock has been moving in a set range between about $79.24 and $86.74 over the last month. This narrow pattern lets the price absorb its gains and form a new base of support.
- Clear Support and Resistance: The study finds a clear support area between $80.23 and $83.23, made by a mix of trendlines and moving averages. On the other hand, nearby resistance is seen around $86.50. These set levels help traders find logical places for stop-loss orders and breakout signals.
- Supportive Market Action: The report mentions positive signs within the narrow pattern, including attention from large investors (as shown by the Effective Volume measure) and a recent "Pocket Pivot" signal—a price and volume pattern often linked with accumulation.
This high setup score indicates the stock is not just trending; it is resting in a controlled way, building energy for its next possible move. The set support area gives a logical place to control risk, while a move above the noted resistance could signal the resumption of the main uptrend.
An Example Trading Plan
Based on this technical form, ChartMill's study proposes a sample trading plan. This example shows how the rules might be used, not as guidance, but as a display of the plan's reasoning.
- Entry: A buy stop order could be set at $86.51, just above the found resistance area, to verify a breakout from the narrow pattern.
- Exit (Stop-Loss): A stop-loss order could be placed at $80.22, just below the main support area, to cap downside chance if the breakout does not work.
- Risk Limits: This plan would mean a possible chance of about 7.3% on the trade itself. Using position size to cap total portfolio chance to, for instance, 1% would decide the capital used for such a trade.
Finding Other Chances
IONS shows the kind of chance the Technical Breakout screen is made to find: a solid stock pausing in a high-condition pattern. For investors wanting to use this method to find other possible setups in the present market, new results are created each day. You can see today's list of stocks that qualify by going to the Technical Breakout Setups screen.
Disclaimer: This article is for information only and is not investment guidance, a suggestion, or an offer to buy or sell any security. The trading plan shown is a sample example based on automatic technical study and is not made for any person's financial condition or risk comfort. Always do your own complete research, think about related news and basic factors (like coming earnings or clinical trial results for biotech companies), and talk with a qualified financial advisor before making any investment choices. Past results are not a sign of future results.
