For investors who use charts and price action to make choices, a methodical way to spot opportunities is important. One method looks across the market for stocks that are both technically sound and creating a clear consolidation pattern, hinting at a possible breakout. This approach centers on two main proprietary scores from ChartMill: the Technical Rating, which judges the general condition and direction of a stock, and the Setup Quality Rating, which examines the state of its present price pattern for a possible entry. Using these scores together, traders try to locate stocks with firm basic momentum that are also preparing for their next important move.
Technical Strength: A Base for Momentum
The first part of this breakout approach is a high Technical Rating, which shows a stock is in a sound uptrend. JM SMUCKER CO/THE (NYSE:SJM) now gets a Technical Rating of 7, putting it in a good spot. This score shows several good technical changes seen in the detailed technical report.
- Good Short-Term Direction: While the long-term direction is still seen as neutral, the short-term direction has become positive. This change implies the stock is gaining approval with traders and investors for the near term.
- Sound Moving Average Agreement: The stock is priced above its important short-term moving averages, like the 20-day, 50-day, and 100-day Simple Moving Averages (SMAs), all of which are increasing. This agreement is a standard sign of growing bullish momentum.
- Recent Results: The stock has recorded a firm 8.13% increase over the last month, showing recent buying activity that backs the positive short-term direction.
A rating of 7 is notable because it selects for stocks that are already showing upward momentum, not those in a downtrend or a long sideways period. This gives an important advantage, raising the chance that a good breakout will result in a continued move upward instead of a failed attempt.
Setup Quality: The Skill of the Entry
A sound trend by itself is not a sign to buy, entering at a bad moment can cause quick losses. This is why the Setup Quality Rating is vital. It finds times of price consolidation, where a stock halts its rise to gather force for its next step up. SJM does well here, having a high Setup Rating of 9.
The technical report points out several parts adding to this very good setup score:
- Consolidation Inside a Band: Over the last month, SJM has been trading between $101.42 and $112.90. It is now trading close to the top of this band, having moved down a bit from recent peaks. This activity has lowered volatility and made a sharper view of support and resistance.
- Clear Support and Resistance: The study finds a definite support area between $109.28 and $110.26, made by a mix of moving averages and trendlines. Just above the present price sits a resistance area between $110.53 and $111.79. These clear points allow for exact trade planning.
- Pocket Pivot Sign: A recent "Pocket Pivot" sign was seen, which is a price/volume pattern often showing accumulation by big investors. This can be a confirming element for the strength of the basic setup.
A high Setup Rating like this addresses the important question of when to think about an entry. It implies the stock is not stretched too far but is instead becoming tighter, giving a sensible area for a stop-loss order (below support) and a definite breakout point (above resistance) to monitor.
A Possible Breakout Situation
From this study, a technical setup appears. The consolidation near the top of its recent band, along with sound close support, shows a possible chance. A clear move above the $111.80 resistance point could be seen as a breakout, signaling a restart of the short-term uptrend. The nearby support area around $110 gives a sensible place to control risk with a stop-loss order.
This pairing of a positive Technical Rating (7) and a very good Setup Rating (9) is exactly what the Technical Breakout screen is made to locate. It finds stocks that have the momentum to go and the pattern hinting they are ready to do so.
For investors wanting to find other possible breakout choices, new results from this screening method are ready each day. You can see the present list of stocks that qualify by going to the Technical Breakout Setups screen.
Disclaimer: This article is for information only and is not investment advice, a suggestion, or an offer to buy or sell any security. The study is based on technical data and automated scoring models. Always do your own research, think about your personal money situation and risk comfort, and talk with a qualified financial advisor before making any investment choices. Past results are not a guide for future outcomes.
