For investors using a technical analysis strategy, finding stocks that are in a solid trend and ready for a continued move is a main goal. One methodical way to do this is the "Technical Breakout" approach, which centers on two main proprietary measures from ChartMill: the Technical Rating and the Setup Quality Rating. The Technical Rating, given from 0 to 10, measures the general condition and trend force of a stock. The Setup Quality Rating, also on a 0-10 scale, judges the condition of a stock's present consolidation shape to find possible entry points. By looking for stocks with high marks in both areas, investors can sort for securities that are not only technically sound but also making shapes that indicate a high-chance breakout could be near.
Morgan Stanley (NYSE,MS) recently appeared from such a scan, presenting a strong case for technical investors. The global financial services firm has shown notable force, and the chart study indicates it may be getting ready for its next move upward.
Technical Force: A Base of Momentum
The base of any breakout strategy is a stock's basic trend force. A high Technical Rating shows a stock is in a verified uptrend across several timeframes, which is important because breakouts from consolidation inside a solid trend have a better chance of working. Morgan Stanley does very well in this basic part, receiving a complete Technical Rating of 10.
This highest mark is backed by a number of specific measures from its technical report:
- Trend Alignment: Both the long-term and short-term trends for MS are marked as positive, verifying aligned momentum.
- Moving Average Support: The stock is trading well above its important moving averages (20, 50, 100, and 200-day SMAs), all of which are in rising arrangements. This layered alignment of support levels is a standard sign of a good uptrend.
- Relative Strength: MS is doing better than 86% of all stocks in the market over the last year and holds the same leading spot within its Capital Markets industry group.
- Price Performance: The stock is trading near its 52-week high, having given large gains over several periods (+35% over 12 months, +32% over 6 months).
This mix of factors shows a stock in a forceful, maintained uptrend, exactly the type of setting where successful breakouts are most probable to happen. A full list of these technical parts is ready in the full ChartMill Technical Report for MS.
Setup Quality: Finding the Entry Area
While a solid trend is needed, it is not enough for a good trade. A stock can be stretched, making a careful entry hard. This is where the Setup Quality Rating becomes key. It finds times of consolidation or "tight" trading, which often come before a clear move. Morgan Stanley now has a Setup Rating of 8, showing a high-condition pattern is present.
The technical report points out several traits that add to this positive setup score:
- Consolidation Pattern: The study notes MS is now showing a "bull flag" pattern, which is a short pause or pullback inside a bigger uptrend. This is a common continuation pattern watched by technical traders.
- Lowered Volatility & Set Support: The report mentions lowered volatility while prices consolidate, with a set support zone found between $180.77 and $183.51. A well-set support area allows for sensible placement of a stop-loss order, handling risk well.
- Positive Signal: A recent "Pocket Pivot" signal was seen, which is a volume-based indicator suggesting buying by larger players during the consolidation phase, adding a layer of verification.
Based on this setup study, the report proposes a possible trading plan with an entry point just above the recent consolidation high at $188.83 and a stop-loss order placed below the support zone at $180.76.
Conclusion
For technical investors, Morgan Stanley presents a standard example of what a breakout setup appears like. It joins a top-level Technical Rating of 10, verifying its status as a market leader in a forceful uptrend, with a high Setup Quality Rating of 8, showing it has consolidated its gains and may be preparing for a continuation move. The existence of a bull flag pattern, clear support levels, and a recent pocket pivot signal further define the chance.
It is important to recall that technical shapes show chances, not guarantees. Any trade should be done with correct risk management, including the use of stop-loss orders and thought of total portfolio exposure.
Interested in finding more possible breakout setups like this one? You can run the same scan each day using the ChartMill Technical Breakout Setups tool.
Disclaimer: This article is for information only and does not make up financial advice, a suggestion, or an offer or request to buy or sell any securities. The study is based on technical indicators and past data, which are not assurances of future results. Investing includes risk, including the possible loss of principal. Always do your own research and think about your financial position and risk tolerance before making any investment choices.
