For technical investors, spotting stocks that are in a solid uptrend and ready for their next advance is a central method. One way to do this is by using two main measures: a stock's general technical condition and the state of its present price pause. The aim is to locate market leaders that are in a short rest, giving a possible chance to enter before a move higher. A specialized screening tool uses this idea by selecting stocks with strong marks in both a Technical Rating, which gauges trend force, and a Setup Rating, which evaluates the form and condition of a pause pattern. This method tries to point out chances where a stock's built-in force matches a good potential gain versus risk arrangement.
Technical Force: A High-Level Achiever
MICROCHIP TECHNOLOGY INC (NASDAQ:MCHP) is notable right away with a top Technical Rating of 10 out of 10. This high mark shows very good technical condition across many time periods. The base of a solid breakout pick is a forceful built-in trend, and MCHP meets this need.
- Trend Agreement: Both the long-period and short-period trends for MCHP are marked as good. This agreement is key, as it shows continued buying without major disagreement between different investor holding periods.
- Market Outperformance: The stock is doing better than 91% of the wider market over the last year, a main trait for a possible leader. It is now trading close to its 52-week high, showing it can keep its advances.
- Moving Average Backing: The stock's price is above all its main moving averages (20, 50, 100, and 200-day), and each of these averages is itself moving upward. This layered arrangement of support levels is a standard sign of a solid uptrend.
This mix of elements verifies that MCHP is not just moving up by chance but is doing so with steady, quantifiable force, the precise sort of technical base looked for in breakout plans. A complete look at these measures is in the full ChartMill Technical Report.
Setup Condition: Pause Before the Next Advance
While a forceful trend is needed, it is not enough for a best entry. Buying a stock that just jumped can lead to quick declines. This is where the Setup Rating matters, as it finds times of pause where the stock is resting. MCHP gets a high Setup Rating of 9, meaning a good-quality rest inside its uptrend.
- Bull Flag Formation: The technical report states that MCHP is now showing a bull flag formation. This pattern appears after a fast price rise (the pole) is followed by a small, downward-tilting pause (the flag). It is often seen as a continuation pattern, hinting the earlier uptrend will probably continue.
- Clear Support Area: A defined support area has been formed between $74.70 and $76.87, made by a meeting of trendlines and moving averages. For a trader, this gives a sensible and clear place to set a protective stop-loss order, controlling risk well.
- Recent Buying Signal: The report also points out a recent "Pocket Pivot" signal, which is a volume-based sign hinting at buying by bigger participants during the pause phase. This can come before new upward force.
The high Setup Rating verifies that the stock's recent price movement is helpful, not harmful. The pause is tight, support is clear, and the pattern hints the rest is more a break inside a continuing move upward.
A Specific Trade Plan
From this study, the technical report proposes a clear, rule-based plan. It suggests an entry point just above the recent 10-day high at $81.44, which would confirm a move out of the bull flag pause. A stop-loss order is proposed below the noted support area at $74.69, capping the possible trade loss to about 8.3%. This plan shows the breakout method: entering on shown force (a new high) while using the pause's support level to set and cap risk.
Locating Other Chances
MCHP shows the sort of chance this screening process is made to find: a market leader in a forceful trend, giving a clear entry point. Investors searching for similar technical breakout plans can run the screen themselves to find new picks each day. You can see the present list of fitting stocks by going to the Technical Breakout Setups screen.
Disclaimer: This article is for information only and is not investment guidance, a suggestion, or a bid to buy or sell any security. The trade plan described is made automatically and given as an example for learning. All investing has risk, including the chance to lose the original amount. You should do your own study, think about your money situation, risk comfort, and investment goals, and talk with a registered financial advisor before any investment choices. Past results do not guarantee future outcomes.
