Technical investors often look for stocks showing both good underlying momentum and defined consolidation patterns that indicate possible breakouts. This method uses two specific ChartMill indicators: the Technical Rating, which evaluates a stock's general technical condition on a scale from 0 to 10, and the Setup Quality Rating, which measures the condition of a consolidation pattern on the same scale. Stocks with good scores on both measures are viewed as leading options for technical breakout methods, as they show solid basic trends hesitating at possibly favorable entry points.
WP CAREY INC (NYSE:WPC), a varied real estate investment trust concentrating on single-tenant, industrial, warehouse, and retail properties, currently shows such a profile based on the most recent technical analysis.
Technical Strength Assessment
The base of any breakout trade is a stock with confirmed positive momentum, which is exactly what the Technical Rating is made to find. WP CAREY INC receives a solid Technical Rating of 8, indicating good underlying technical condition. This high rating is not random, it is formed on several important points of strength that match the aims of the breakout method.
- Trend Alignment: The stock shows a positive long-term trend, which is important for breakout setups as it raises the chance that a breakout will persist in the direction of the main trend.
- Relative Performance: WPC shows better performance compared to the wider market and its industry group. It has done better than 71% of all stocks in the last year and is in the leading group of its Diversified REITs industry, doing better than 87% of its 127 competitors.
- Moving Average Support: The stock is priced above its main moving averages (20, 50, 100, and 200-day), and all these averages are in upward arrangements. This layered arrangement of moving averages is a typical indication of a sound uptrend and gives several levels of possible support.
A complete breakdown of these items and others is provided in the full ChartMill Technical Report for WPC.
Setup Quality and Trading Parameters
While a solid trend is necessary, entering a stock at a high price can be hazardous. The Setup Quality Rating handles this by finding times of consolidation, which give more defined entry and risk management points. WPC has a very good Setup Rating of 9, showing a high-condition consolidation pattern has developed.
The recent price movement shows WPC trading in a narrow band between $66.60 and $69.79 over the last month. This coiling price activity, after a consistent uptrend, is precisely the type of pattern technical traders seek. The analysis finds a clear resistance area just above the present price, beginning at $67.98. A clear move above this point could indicate the beginning of a new upward phase.
The existence of a solid support area below the present price, extending from $66.46 to $67.86, allows for accurate risk management. Also, the system recently found a "Pocket Pivot" signal, a price/volume accumulation pattern that frequently comes before notable upward moves. Using this analysis, an example trading setup is proposed:
- Entry: A Buy Stop order at $69.21, set just above the found resistance area to confirm the breakout.
- Stop-Loss: A Stop Loss order at $66.59, set just below the main support area to cap possible losses.
- Risk Management: This setup offers a worst-case risk of 2.62 points, or 3.79% on the trade.
For investors looking for new technical breakout chances, new setups are found each day. You can see the present list of qualifying stocks by going to the Technical Breakout Setups screen on ChartMill.
Disclaimer: This article is for informational purposes only and does not constitute investment advice of any kind. The trading setup described is an automated example for educational purposes and is not a recommendation. Always conduct your own research, consider your risk tolerance, and be aware of upcoming events like earnings reports before making any investment decisions.
