ON Semiconductor (NASDAQ:ON) Shows Strong Technical Breakout Potential with High Ratings

Technical breakout strategies focus on spotting stocks with strong momentum that are pausing before their next upward move. The method uses two main measures: the ChartMill Technical Rating, which checks a stock’s trend strength, and the Setup Quality Rating, which looks at whether the stock is forming a good base for a possible breakout. Stocks scoring high on both often offer attractive risk-reward setups for traders.

ON SEMICONDUCTOR (NASDAQ:ON) stands out as a strong candidate, showing both good technical health and a clear consolidation pattern. The stock’s Technical Rating of 7 points to a positive trend, while its Setup Rating of 8 hints at a narrowing price range that may lead to a breakout.

Technical Strength Points to a Positive View

ON Semiconductor’s Technical Rating of 7 shows a stock in a steady uptrend, backed by these details:

• Trend Strength: The long-term trend is upward, while the short-term trend is flat, indicating a possible pause before the uptrend continues.
• Moving Averages: The stock is above key moving averages (20-day, 50-day, and 100-day), supporting the bullish outlook.
• Relative Performance: While ON trails the S&P 500 slightly, it has done better than 66% of all stocks over the past year and ranks in the top half of its semiconductor peers.

A closer look at the technical analysis report shows more support levels, with a key area between $54.96 and $55.43 acting as a possible floor. This gives a clear spot for stop-loss placement, an important part of breakout trading.

Setup Quality Shows a Pause Before a Move

The Setup Rating of 8 highlights a well-defined consolidation phase, a key part of breakout strategies. These factors contribute to the score:

• Narrowing Price Range: Recent trading has seen ON move between $54.16 and $63.63, with the stock now near the lower end. This squeeze often comes before a breakout.
• Support and Resistance: Clear support sits around $55, while resistance levels are at $60.73 and higher. A move above these levels could signal more upside.
• Lower Volatility: The stock’s Average True Range (ATR) of 4.41% suggests quieter trading, a common sign before breakouts.

The setup suggests a possible entry above $60.74, with a stop-loss just below $54.95, offering a clear risk-reward scenario.

Why This Matters for Breakout Traders

Breakout strategies work by finding stocks that are both technically strong and pausing in a way that limits risk while offering upside. ON Semiconductor fits this profile by:

• Showing a steady uptrend (Technical Rating ≥ 7).
• Forming a clear base with defined support and resistance (Setup Rating ≥ 8).
• Offering a reasonable risk level (~9.5% stop-loss distance) compared to potential gains if resistance breaks.

For traders looking for more breakout candidates, the Technical Breakout Setups screen provides an updated list of stocks meeting similar criteria.

Disclaimer: This analysis is for informational purposes only and should not be taken as investment advice. Always do your own research and use risk management strategies before trading.