For investors who use charts and price action to guide their choices, a methodical way to find possibilities is important. One such technique involves searching the market for stocks that are both technically sound and creating a clear pattern for entry. This method centers on two main proprietary metrics from ChartMill: the Technical Rating, which measures the general condition and direction of a stock, and the Setup Quality Rating, which evaluates if the stock's present price action shows a distinct, lower-risk entry point. By sorting for stocks with strong marks in both areas, traders try to find possible breakout candidates within the market's top companies. A recent filter using this approach has pointed to TJX COMPANIES INC (NYSE:TJX) as a notable candidate.
Technical Strength: A Base of Leadership
The first part of this method is finding stocks with sound basic technicals, and TJX does very well here. According to the detailed technical report, the company receives a perfect Technical Rating of 10 out of 10. This highest-level mark shows notable soundness across various timeframes and measures, which is exactly what the method aims to sort for. A high Technical Rating shows a stock is a market leader, not just having a temporary rise.
The report lists several parts adding to this excellent rating:
- Trend Alignment: Both the long-term and short-term trends for TJX are marked as positive, confirming continued upward movement.
- Relative Performance: The stock's yearly result is better than 80% of the market and it does better than 76% of similar companies in the Specialty Retail industry.
- Price Position: TJX is trading close to its 52-week high, a typical trait of sound, trending stocks.
- Moving Average Support: The stock's price is above all its main simple moving averages (20, 50, 100, and 200-day), and each of these averages is itself in an upward trend, forming a stacked support framework.
This full technical condition is important for the breakout method. It implies the stock is in a verified uptrend, raising the chance that a breakout from a consolidation pattern will lead to a move higher, instead of a false sign.
Setup Quality: The Pattern for Entry
While technical soundness points out which stock to watch, the Setup Quality Rating deals with when to think about an entry. TJX gets a 9 out of 10 on this measure, showing it is forming a high-grade consolidation pattern. This is the second key filter in the method, as it tries to prevent buying stretched stocks and instead find entries after a time of pause.
The technical report states that TJX has been trading in a narrow band over the last month, between about $152 and $159. This time of lower volatility and sideways movement after a previous rise is the consolidation the setup rating tries to identify. Main parts of the setup include:
- Clear Support and Resistance: The consolidation has made a definite resistance area just above the present price (around $157.82 - $158.26) and a support area below (reaching down to $151.75).
- Closeness to Main Averages: The present price is trading near its rising 20-day moving average, which is a good sign for the continuation of a possible move.
- Supportive Volume Activity: The report points out a recent "Pocket Pivot" signal, a pattern where the stock rises on volume greater than any down volume day in the earlier period, hinting at accumulation.
For a technical trader, this setup gives a clear plan. The definite resistance level offers a possible trigger point for a breakout entry, while the nearby support area allows for a reasonable and fairly close placement of a protective stop-loss order, controlling risk directly.
A Specific Trading Plan
Based on the study of its technical soundness and setup quality, the ChartMill report proposes a particular trading plan for TJX. It suggests an entry order just above the noted resistance area at $158.27, which would be activated if the stock breaks out of its recent band. A stop-loss order is proposed below the recent consolidation support at $152.12. This plan tries to join a verified breakout while clearly capping downside risk, a rule key to orderly technical trading.
Finding Additional Possibilities
The pairing of a perfect Technical Rating and a high Setup Quality Rating makes TJX a strong example of what the Technical Breakout Setups filter is made to find. This methodical approach scans the market to point out stocks that are both leading and set for a possible next move. For investors wanting to see the current list of qualifying stocks, new breakout candidates are found each day. You can view the newest outcomes by going to the Technical Breakout Setups screen.
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 trading plan shown is an automated, explanatory example built on technical measures and is not a promise of future results. Always do your own study, think about your money situation and risk comfort, and talk with a qualified money advisor before making any investment choices. Past results are not a sign of future outcomes.
