For technical investors, finding stocks that are in a solid uptrend and ready for their next move is an important strategy. One methodical way involves looking for stocks with both a high technical health score and a high-quality setup pattern. This process finds market leaders that are pausing after an advance, possibly giving a good risk-reward entry point for the trend to continue. LendingClub Corp (NYSE:LC) recently appeared from such a search, presenting an interesting profile for traders watching for breakout patterns.
A Solid Technical Base
The first step of this strategy is confirming a stock is in a definite and healthy uptrend. LendingClub Corp’s technical report shows a strong base, giving the stock a near-perfect Technical Rating of 9 out of 10. This number combines several timeframes and measures to assess the stock's basic strength.
- Trend Agreement: Both the short-term and long-term trends for LC are rated as positive. This agreement across timeframes is a significant signal, showing continued buying pressure and momentum.
- Moving Average Backing: The stock is trading above all its main simple moving averages (20, 50, 100, and 200-day), and each average is itself rising. This stacked, positive arrangement acts as a series of changing support levels.
- Relative Performance: LC is showing clear outperformance. It ranks in the top 16% of all stocks over the last year and beats 84% of other stocks in the Consumer Finance industry, showing it is a leader in its sector.
- Price Action: The stock is currently trading near its 52-week high of $21.67, a common trait of stocks in strong uptrends. Its six-month gain of over 64% further highlights the force of its recent rise.
This mix of elements meets the first essential filter for a breakout candidate: it confirms LC is a technically sound stock in a clear uptrend, not a weaker stock or one in a basing pattern just starting to turn.
A High-Quality Setup for Entry
A solid trend alone is not a reason to buy; entering after a sharp, long move has more risk. The second filter looks for a high-quality setup, a pause that gives a clear entry and controllable risk. LC does well here too, getting a Setup Quality Rating of 9.
- Pause Within the Trend: After its strong rise, LC's price action has become tighter, trading in a range between about $18.74 and $21.67 over the last month. This pause near the highs lets the stock absorb its gains and build energy for a possible next move.
- Clear Support and Risk Control: The analysis finds a definite support area between $20.07 and $20.44, made by a combination of trendlines and moving averages. For a trader, this gives a sensible area to place a protective stop-loss order, setting the trade's maximum risk from the start.
- Supporting Volume Activity: The setup summary mentions a recent "Pocket Pivot" signal, a pattern where the stock moves up on volume higher than any down volume day in the recent period. This can be an early sign of institutional buying during a pause, adding another layer of confirmation to the setup.
This high setup score directly answers the "when" to buy. It shows LC is not stretched but is instead tightening within its uptrend, offering a possible entry point with a close support level to control risk.
Trade Plan and Market Setting
The automated analysis based on these ratings suggests a specific, though example-based, trading plan. It proposes an entry on a move above the recent range at $21.68, with a stop-loss placed just below the identified support area at $20.06. This sets a risk of about 7.5% on the trade. It is important to note this is a model made from the technical patterns; traders should change such details to match their own risk comfort and plan.
The wider market setting gives a neutral-to-positive background. While the S&P 500's long-term trend is neutral, its short-term trend is positive, which usually helps the kind of breakout moves this strategy aims to find.
Finding Similar Chances
LendingClub Corp shows the kind of chance technical breakout searches are made to find: a leader in a solid trend, taking a break that may come before its next rise. For investors wanting to use this method to find other possible setups, new results are created daily. You can see the current list of stocks that qualify by visiting the Technical Breakout Setups screen.
Disclaimer: This article is for information only and is not investment advice, a suggestion, or an offer to buy or sell any security. The trading setup described is an automated, example based on technical measures and is not a promise of future results. Always do your own research, think about your money situation and risk comfort, and talk to a qualified financial advisor before making any investment choices. Past results do not guarantee future outcomes.
