For technical investors, finding stocks that are in a solid trend and ready for a near-term price change is a basic part of breakout trading methods. One organized way is to look for stocks that show good underlying technical condition while also making a narrow consolidation pattern, indicating a possible breakout is near. This process uses two specific scores from ChartMill: the Technical Rating, which measures the general strength and trend of a stock, and the Setup Quality Rating, which judges the condition of its present price consolidation. A stock with high marks on both measures can offer an interesting chance, as it joins a positive longer-term path with a specific, lower-risk entry point.
Resideo Technologies Inc (NYSE:REZI) recently appeared in such a search, gaining notice for its mix of firm technicals and a good-quality setup. The company, which supplies important comfort, energy, and security products for homes and businesses, seems to be forming a base for its next possible upward move.
Technical Strength: A Firm Base
The first part of this breakout method is a firm technical base, which the Technical Rating seeks to measure. A high rating shows a stock is in a confirmed uptrend and doing better than similar stocks, giving the push required for a good breakout. Resideo’s technical picture supports this idea.
According to the detailed ChartMill Technical Analysis report, REZI gets a Technical Rating of 7 out of 10. This score puts it clearly in uptrend area and is supported by several main points:
- Long-Term Trend: The long-term trend for REZI is marked as positive, which is the most important part for trend-based methods. While the short-term trend has become neutral, the main upward direction stays in place.
- Relative Strength: The stock shows clear better performance. Over the last year, REZI has done better than 89% of all stocks in the market. Inside its specific Building Products industry, it beats 90% of its 42 competitors, confirming its leading position.
- Price Position: REZI is now trading in the higher part of its 52-week range. Although it is a little behind the S&P 500, which is close to new highs, its position indicates continued buyer activity over a longer time.
This mix of a positive long-term trend, firm relative strength, and a higher price position gives the "which stock" answer for technical investors: a stock with confirmed upward movement.
Setup Quality: The Consolidation Before the Change
A firm trend by itself is not a sign to buy; entering during a steep climb often results in buying at a high. The second part, the Setup Quality Rating, deals with the "when" by finding times of consolidation. A high score indicates the stock is trading in a narrow range, gathering energy, and offering a specific level of support for setting a protective stop-loss order.
This is where REZI’s chart pattern becomes especially notable. It has a Setup Quality Rating of 9 out of 10, signaling a very good consolidation pattern. The technical report notes the recent trading activity and the specific levels that describe the setup:
- Price Consolidation: Over the past month, REZI has traded between $33.22 and $38.42. It is now consolidating in the middle of this range, which can offer a possible entry chance as price movement lessens.
- Specific Support and Resistance: The analysis finds a clear support area between $35.21 and $35.78, made by a mix of trendlines and moving averages. Just above the present price, a resistance area exists between $37.89 and $38.04. This makes a well-described trading range.
- Institutional Activity: An extra positive point is that the report sees activity from large traders in recent days, as measured by volume study, which can be a sign before a notable move.
The existence of this narrow consolidation near support, below a described resistance level, is exactly what breakout traders seek. It allows for a planned entry point with controlled risk, as a stop-loss can be logically set just below the found support area.
A Possible Trading Plan
Based on this study, ChartMill’s system suggests a concrete, though automatic, trading plan. It proposes an entry at $35.84, just above a main moving average, with a stop-loss at $35.20 below the support area. This limits the example risk on the trade to about 1.8%. It is important to note that this is an example made from the technical levels; investors should always do their own study to decide entry, exit, and position size that fit their personal risk level.
Finding Like Chances
Resideo Technologies shows the kind of chance technical breakout searches are made to find: a leader in its field pausing inside a longer-term uptrend. For investors looking to search the market for like setups each day, the process is made efficient through specific tools.
You can find new technical breakout choices every day by using the Technical Breakout Setups screen. This screen automatically selects for stocks with a Technical Rating and Setup Quality Rating of 7 or higher, giving a filtered beginning point for more research.
Disclaimer: This article is for information only and does not make investment advice, a suggestion, or an offer to buy or sell any security. The study is based on technical data and automatic scoring models. All trading and investment choices have risk, and you should do your own complete research and talk with a qualified financial advisor before making any choices.
