For investors using technical analysis to find possible opportunities, a common difficulty is locating stocks that are in a solid uptrend and also present a low-risk chance to enter. An approach that deals with this uses two specific scores: the ChartMill Technical Rating and the ChartMill Setup Quality Rating. The Technical Rating measures the general condition and trend strength of a stock, while the Setup Quality Rating evaluates if the stock's present price movement is forming a good consolidation pattern, ready for a possible move upward. By searching for stocks that rate well on both measures, traders try to find technically good equities that are set for their next upward move. One stock now visible on this search is OUTFRONT MEDIA INC (NYSE:OUT), an out-of-home advertising real estate investment trust.
A Base of Technical Condition
The base of this breakout method is first finding a stock with solid basic technical condition, which is exactly what the ChartMill Technical Rating calculates. A high score here shows a stock is in a clear uptrend with good relative performance. OUTFRONT Media receives a top Technical Rating of 10, putting it in the group of the market's technically leading stocks. Looking at the full technical report shows the extent of this condition.
- Trend Agreement: Both the long-term and short-term trends for OUT are marked as positive. This agreement across different time periods points to a unified and strong price movement.
- Relative Performance: The stock's performance over one year is better than 83% of all other stocks in the ChartMill system, and it is the best performer inside its Specialized REITs industry, doing better than 100% of similar companies.
- Moving Average Support: The stock price is above all its important simple moving averages (20, 50, 100, and 200-day), and each of these averages is itself in an upward pattern. This layered agreement of support levels is a typical sign of a solid bullish trend.
- Nearness to Highs: OUT is now trading close to its 52-week high of $27.04, showing its ability to keep its upward movement.
This outstanding technical rating is important for the method because it selects for stocks that are already in a controlling uptrend. The idea is that a stock showing such condition is more probable to successfully move out of a consolidation and keep its rise than a stock in a weak or forming pattern.
A Good Setup for Entry
While a solid trend is needed, it is not enough for a careful trade. Buying a stock that has just completed a big, extended move frequently results in quick declines. This is where the Setup Quality Rating becomes important, as it finds times of consolidation or narrow trading ranges that present clear risk limits. OUTFRONT Media also gets a top score of 10 in this group, indicating a very good possible entry setup.
The technical report lists several parts adding to this high setup score:
- Consolidation and Lowered Volatility: The stock has been trading in a band between $24.19 and $27.04 over the last month, with the present price located in the middle. This time of consolidation has let the stock absorb its recent increases and form a new base of support.
- Clear Support Area: A distinct support area exists between $25.58 and $25.69, made by a combination of moving averages and trendlines. This gives a sensible and close level for a protective stop-loss order, which is a main part of risk control.
- Positive Market Action: The report mentions recent activity from large participants, as calculated by the Effective Volume indicator, and the happening of a "Pocket Pivot" signal, a bullish price and volume pattern that often comes before notable moves.
Using this study, the report proposes a possible trading setup with an entry point just above the recent band at $26.88 (a buy-stop order) and an exit point below the support area at $25.57. This sets a risk of about 4.9% on the trade, allowing for exact position sizing. The existence of this good setup directly answers the "when" to buy, giving a tactical entry point inside the situation of the established bullish "which" stock to buy.
Summary and Additional Study
OUTFRONT MEDIA INC presents a strong example for the technical breakout method, joining a top-level Technical Rating that confirms a solid uptrend with a top-level Setup Quality Rating that finds a low-risk consolidation pattern. For traders using this system, OUT stands for the kind of chance the search is made to find, a market leader pausing before a possible next rise.
It is necessary to recall that technical setups are sensitive to time and the market situation shifts each day. The breakout search that found OUT is performed often to show new opportunities. You can see the present list of matching stocks by going to the Technical Breakout Setups search.
Disclaimer: This article is for information only and does not form investment advice, a suggestion, or an offer or request to buy or sell any securities. The study is based on technical data and automatic scoring models. All trading and investment choices include risk, and you should do your own study and talk with a qualified financial advisor before making any choices. Past results do not show future outcomes.
