Financial markets offer many opportunities for technical traders who focus on finding stocks with good underlying momentum and good entry points. One systematic method involves scanning for securities that show both good technical condition and consolidation patterns indicating possible breakouts. This approach uses ChartMill's own Technical Rating, which measures a stock's general technical condition, with the Setup Quality Rating, which finds periods of price consolidation that frequently come before large moves.
SCHWAB (CHARLES) CORP (NYSE:SCHW) has appeared from such scanning processes as a candidate to review for technical traders. The financial services company, which provides wealth management, securities brokerage, and banking services through its Investor Services and Advisor Services segments, currently shows features that match breakout trading methods.
Technical Strength Assessment
The basis of any breakout trading method starts with finding stocks showing good technical features. SCHWAB (CHARLES) CORP gets a Technical Rating of 7, pointing to good technical condition that indicates the stock is in a confirmed uptrend. This rating is especially important when noting that stocks with scores of 7 or more usually show continued upward momentum, making them better choices for breakout methods.
Important technical notes supporting this rating are:
- The long-term trend stays positive while the short-term trend has become neutral
- Year-to-date performance is better than 74% of all stocks in the market
- Inside the Capital Markets industry, SCHW does better than 86% of its 235 competitors
- Several moving averages (SMA20, SMA100, SMA200) display rising paths
- The stock keeps its place in the higher part of its 52-week range
These points together show that SCHW has the underlying condition that breakout traders look for, as stocks with higher technical ratings have in the past shown a better chance of successful breakouts from consolidation patterns.
Setup Quality Analysis
While technical condition gives the basis, the Setup Quality Rating of 8 points out the current consolidation pattern that makes SCHW especially notable for breakout traders. This high score indicates the stock has been trading in a narrow range lately, forming the coiled-spring effect that often comes before notable price changes.
Recent price movement shows:
- A clear trading range from $91.96 to $97.16 over the last month
- Clear resistance found between $94.56 and $94.60
- Good support formed between $93.73 and $94.50
- Current price location near the top edge of this consolidation range
The closeness to resistance, together with the narrow trading range, makes conditions where a breakout above $94.61 could signal the start of a new upward move. This setup condition is important for timing entries, as it helps traders prevent chasing extended moves and instead place themselves at the start of possible new trends.
Support and Resistance Framework
The technical structure shows a clear framework for risk management:
- Main support is located between $93.73 and $94.50, made by several trendlines and moving averages
- Additional support is present between $91.03 and $91.96, giving more downside protection
- Immediate resistance is between $94.56 and $94.60, marking the breakout level
- More resistance is found between $97.08 and $98.69
This clear marking of price levels allows exact trade planning, letting traders specify entry points, profit goals, and stop-loss levels with measurable risk parameters.
Trading Considerations
For traders watching SCHW for possible breakout chances:
- A clear move above $94.61 could prompt entry review
- Initial support near $93.72 gives a logical stop-loss reference point
- The 1.92% Average True Range shows normal daily volatility
- The risk-reward setup displays about 0.94% risk for the first breakout trade
The mix of good technical foundations and a well-made consolidation pattern makes SCHW a candidate worth watching for technical traders using breakout methods. As with all technical setups, confirmation through price movement is still necessary, and correct position sizing should always match personal risk tolerance.
View more possible breakout chances found through our systematic scanning process
Disclaimer: This analysis is based on technical indicators and historical price patterns and should not be considered as investment advice. All trading and investment decisions involve risk, and individuals should conduct their own research and consult with financial advisors before making any investment decisions. Past performance does not guarantee future results.
