Channel Breakout and Basing Patterns.
Channel Breakouts are a popular method of trading stocks. The principal
behind a Channel Breakout is that when a stock trades above the highest
price or below the lowest price in the last N (number of periods) number of
periods, a new trend may be starting to take place.
This channel trading method can be used in any number of periods from minute
bars to weekly time frames.
The results of using such a method will often result in a stock moving above
a defined resistance or support area.
When a stock is in a defined trend, the channel will continue to step up or
down, depending on the trend.
Let’s look at Sun Microsystems (NASDAQ: SUNW).
After down trending from early from 102 to 87, SUNW has been moving up to
challenge its old high.
If the market continues to rise after today’s Fed meeting, there is a good
chance that SUNW will continue its rise too.
I like buying stocks making new highs. Jessie Livermore spoke about how
stocks behave when breaking the $100 price level and it is still true today.
I am looking to see if SUNW can break that $100 price level.
I would Buy SUNW at 100 on a Buy Stop.
If SUNW hits 100 it should continue to move higher and I would place a stop
at 98 �.
This move would be valid anytime this week.
