For investors who use charts and price action to guide their choices, a methodical way to find possible trades is important. One such technique looks for stocks that are both technically sound and making a positive price pattern, a pairing that can indicate a coming price move. This plan centers on two specific metrics: the ChartMill Technical Rating, which judges the general condition and direction of a stock, and the ChartMill Setup Quality Rating, which examines if the stock's present price action offers a low-risk chance to enter. By sorting for stocks with good marks in both areas, traders try to find chances in market favorites that are resting before their next possible upward move.
A recent search using this approach has pointed to TJX COMPANIES INC (NYSE:TJX) as a notable candidate. The off-price retailer, which runs chains like T.J. Maxx, Marshalls, and HomeGoods, seems to be showing the exact technical traits this strategy looks for.
Technical Strength: A Base of Momentum
The heart of this strategy starts with finding stocks in clear upward trends, as these are the ones most probable to keep rising. The ChartMill Technical Rating for TJX is a solid 9 out of 10, putting it with the market's best from a technical view. This good mark is not by chance; it is formed on several points of strength shown in the full technical report.
- Clear Uptrend: The long-term direction for TJX is marked as positive, which is the most important part for this strategy. A stock struggling against a main downward trend is much less likely to hold a price move upward.
- Good Relative Performance: Over the last year, TJX has done better than 80% of all stocks in the market. More significantly, it does better than 79% of similar companies in the Specialty Retail industry, showing it leads its sector.
- Position with Key Averages: The stock is priced above all its main moving averages (20, 50, 100, and 200-day SMAs), and each of these averages is also in a rising pattern. This layered position of support levels is a typical sign of a good trend.
- Steady Price Action: TJX is trading in the higher part of its 52-week range, a mark of strength. The report states that its gains over the past year have been "nicely spread over this period," pointing to consistent, steady buying rather than sudden jumps.
This mix of elements gives the basic "which stock" answer for a technical trader. A high Technical Rating confirms TJX is in the right area—it is a sound stock in a positive trend.
Setup Quality: The "When" to Think About Entry
A strong trend by itself is not a reason to buy. Entering a stock that has just made a big, stretched move often results in buying at a high point. This is where the Setup Quality Rating becomes key, dealing with the "when" of the trade. TJX gets a top-level Setup Rating of 9, meaning its price action has been moving sideways in a narrow band, gathering force for a possible next step.
- Sideways Movement Near Highs: The stock has been trading between $152.18 and $162.68 over the last month, a fairly wide but set band. It is now placed in the middle of this band, having moved down from recent highs, which can make a better-probability entry point.
- Defined Support and Resistance: The analysis notes a clear support area between $154.58 and $157.67, made by a combination of trendlines and moving averages. Just above the present price, a set resistance area lies between $161.67 and $161.74. This makes a clear plan: a move above resistance could signal the uptrend starting again, with the support area below giving a sensible place to set a protective stop-loss order.
- Positive Volume Sign: A significant good sign noted in the report is a recent "Pocket Pivot" signal. This is a volume-based measure that suggests buying interest at present price levels, adding support to the strength of the sideways movement.
The high Setup Rating confirms that TJX is not just sound, but it is also pausing in a manner that allows for a careful, risk-controlled trade plan. The nearness to resistance gives a specific trigger level, while the close support area allows for a close stop relative to the stock's longer-term direction.
A Specific Trading Idea
Based on this technical picture, the analysis proposes a possible price move setup. The suggested trade plan involves setting a buy-stop order at $161.75, just above the noted resistance area. A stop-loss order would be set at $154.57, below the main support area. This plan confines the possible risk on the trade to about 4.4% of the entry price. It is a standard example of how the pairing of high technical and setup ratings can turn into a specific, rule-based trading idea.
Find More Possible Price Move Setups
The method that found TJX can be used each day to find new chances. For investors wanting to see the present list of stocks showing good technicals and high-quality setups, the live results of the Technical Breakout screen can be seen here.
Disclaimer: This article is for information only and does not make up investment advice, a suggestion, or an offer to buy or sell any security. The trading setup described is made automatically from technical measures and is given as an example only. All investing and trading includes risk, including the possible loss of principal. Always do your own research, think about your financial position and risk comfort, and talk with a qualified financial advisor before making any investment choices. Past results do not show future outcomes.