|Shares of Gamestop (GME) have been mired in a gigantic two-and-a-half year bottoming and/or consolidation pattern (based on weekly chart analysis), and with the stock now in ascending mode -- and possibly ready to finally break out of one of the last remaining resistance areas -- the appearance of a recent Rahul Mohindar oscillator (RMO) daily swing buy signal seems to imply that the stock may be finally ready to launch higher. Here's a closer look now.|
|FIGURE 1: GME, WEEKLY. Breakouts from large, multiyear patterns can offer traders some very unique opportunities.|
|Graphic provided by: MetaStock.|
|While the daily RMO swing buy signal is important to note, I want to focus on GME's weekly chart, because of its super-bullish implications. First off, note in Figure 1 just how close the stock is to being able to finally break free of the upper resistance barrier near $28.66 (the border between the green and pink shaded areas); a clean break above that price with a confirmed weekly close also above it will mean that the stock has a virtually unhindered pathway to challenge the April 2009 high of $32.82. |
This fact could help give traders some extra confidence if they choose to go long at this juncture; trend-followers might want to initiate a fresh long position, relying on a 2 * average true range (ATR) 10 volatility-based trailing/initial stop to manage the position till final closeout. Less-aggressive traders who aren't as convinced that a sustained market rally is likely might want to run a simple three-bar trailing stop of the daily lows. Truly antsy traders might also want to use that previously mentioned resistance area at $28.66 to take partial profits (should they materialize), using either of the trailing-stop styles just mentioned.
|Trend-followers generally benefit from a positive money flow profile in the stocks and futures contracts they trade, and in the case of GME, the 21-week Chaikin money flow (CMF)(21) indicator (bottom of chart) is in the extremely bullish category, offering an extra measure of technical confidence for GME bulls.|
|When analyzing your list of daily buy signals from your favorite system, always take a look at the price dynamics (especially key support/resistance levels) of the weekly chart as well. You may be surprised at what you discover.|
|Title:||Writer, market consultant|
|Company:||Linear Trading Systems LLC|
|Jacksonville, FL 32217|
|Phone # for sales:||904-239-9564|
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