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Breakout For Suntrust03/21/06 10:10:36 AM
by Gary Grosschadl
What was the reason for the breakout?
|SunTrust Investment Services has been named the "Best Large Institution Program of the Year" for 2005 by the Bank Insurance & Securities Association. Figure 1, a weekly chart, shows a breakout occurring. Did the award fuel the rise? Typical of this bullish pattern of an ascending triangle, the pattern tightens until a break occurs. With good news or perception of good value, the pattern's bullish bias comes to fruition.|
|Volume provides important clues for most breakouts. Abnormal volume or at least a higher spike adds conviction to the move. Ideally, higher than normal volume continues to drive the rise, or there is danger of a false breakout. After the initial excitement is over, there can be a retest of the breakout point. This can be more telling and offers a chance at better prices for new buyers coming in as opposed to chasing the initial surge higher.|
|FIGURE 1: SUNTRUST, WEEKLY. This chart of STI shows a breakout for this financial services company.|
|Graphic provided by: StockCharts.com.|
|The indicators below Figure 1 confirm this bullish thrust. The moving average convergence/divergence (MACD) shows a bullish turn above its zero line, while the relative strength index (RSI) shows a bullish rise past its key 50 level. The stochastics oscillator shows an upleg occurring with upside room. The Chaikin money flow indicator shows a healthy growth in buying power.|
|The target for a triangle breakout is a move above the top trendline equal to the widest part of the formation. Ideally, this is $92 (see Figure 1) and may take some time to be realized. If this breakout fails and returns back inside the triangle, all bullish bets are off.|
Independent Canadian equities trader and technical analyst based in Peterborough
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Date: 03/21/06Rank: 5Comment: