Trading ranges

example 1

It is usually best to wait for the stock to show signs of basing at the lower end of the trading range. In my opinion it is always much easier for a stock to breakout downward through trading range support than it is to breakout to the upside through resistance at the high end of the trading range. The more times the support and resistance zones are “honored’ by the stock the more important they become.

example 2

This is clear example of a stock that has been completely controlled by its historic trading range for the past two years.

example 3

A trading range is an extended period of consolidation. If it occurs after a major bull market in a stock it may actually represent a major top and reversal of trend. It is too early to tell on this stock but that scenario could actually prove out in this instance.

example 4

This is an example of a trading range that is extremely “tight”. Stocks like this are often used as a safe-haven during market turbulence!

By W. Clay Allen CFA