Annaly Capital Management Inc (NYSE:NLY) Shows Strong Breakout Potential with High Technical and Setup Ratings

Technical breakout strategies focus on spotting stocks with solid trends that are holding steady in a narrow range, providing a possible entry before the next upward move. This method uses two main measures: the ChartMill Technical Rating, which checks a stock’s overall trend strength, and the Setup Quality Rating, which looks at whether the stock is forming a good base for a breakout. Stocks with high scores in both areas often present attractive risk-reward opportunities.

Annaly Capital Management Inc (NYSE:NLY) currently matches this breakout screening approach, with a Technical Rating of 7 and a Setup Rating of 9. These scores indicate the stock is in a steady uptrend while also showing a consolidation pattern that may lead to further gains.

Technical Strength Backs the Uptrend

The Technical Rating of 7 shows NLY is in a positive trend, backed by several elements:

• Trend Confirmation: Both short-term and long-term trends are upward, supporting the stock’s momentum.
• Relative Strength: NLY performs better than 83% of its peers in the Mortgage REIT industry, showing sector leadership.
• Price Positioning: The stock is in the upper half of its 52-week range, though it trails the broader S&P 500, which is near record highs.
• Moving Averages: The stock is above its 20-day, 50-day, and 200-day moving averages, with the shorter-term averages rising, a typical bullish sign.

These details fit the breakout strategy’s goal of finding stocks with clear strength, lowering the chance of false breakouts. More on the technicals can be found in the full technical report.

Strong Setup Quality Points to a Good Entry

The Setup Rating of 9 highlights a well-formed consolidation, offering a clear risk-reward scenario:

• Narrow Trading Range: Over the past month, NLY has moved between $19.70 and $21.00, with recent prices near the top of this range. This tight movement often comes before a breakout.
• Support and Resistance: The stock has solid support around $20.71, formed by multiple trendlines and moving averages, providing a logical stop-loss level. Resistance is light above the current price, with only a small barrier at $20.86.
• Volume and Accumulation: Recent volume trends show institutional interest, including a "Pocket Pivot" signal, a bullish sign where price rises on higher-than-average volume.
• Lower Volatility: The Average True Range (ATR) of 1.57% points to calm trading, common before a potential move.

Trade Setup and Risk Management

The breakout screen suggests a possible entry above $20.87, with a stop-loss just below $20.20. This setup caps downside risk to ~3.2%, while upside potential remains open if the breakout holds. Traders should watch volume on the breakout for confirmation, as low participation could mean a false move.

Finding Other Breakout Opportunities

NLY is one of several stocks currently highlighted by the Technical Breakout Setups screen. For those looking for more ideas, the full list of breakout candidates is updated daily, filtering for stocks with strong technicals and high-quality setups.

Disclaimer: This analysis is for informational purposes only and should not be seen as investment advice. Always do your own research and consider risk tolerance before trading.