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ASCENDING TRIANGLES


AKSteel Ready To Rally

04/04/07 11:53:50 AM
by Chaitali Mohile

An ascending triangle is about to break out in AKSteel Holding.

Security:   AKS
Position:   Buy

AKSteel Holding Corp. (AKS), which began in a wide range, has been narrowing since early March. This has formed an ascending triangle, a bullish continuation pattern, on its daily chart (Figure 1). Volume has declined as the triangle narrowed.



Though the average directional moving index (ADX)(14) declined from 50 to 20, it shows a developing uptrend. The ADX at 20 is moving with equal buying and selling pressure, so the trend remains strong. The relative strength index (RSI)(14) moved above 50, indicating the bullish strength in rally, but the range-bound move within 50–60 makes trading difficult. The 61 level on the RSI could be the place to buy at a breakout point.

FIGURE 1: AKS, DAILY. An ascending triangle will lead to a rally heading toward the $28 level.
Graphic provided by: StockCharts.com.
 
Traders may consider buying this stock with a target of $28. The width of the triangle is $4 ($24 - $20). By adding $4 to $24, the target is fixed.



FIGURE 2: AKS, WEEKLY. The flag & pennant breakout will carry the price to $31.
Graphic provided by: StockCharts.com.
 
The flag & pennant is another continuation pattern that AKS has formed on its weekly chart (Figure 2). The consolidation period after a long bullish rally forms a flag on the charts. The RSI (14) has moved close to 70. The volatile move at an overbought position cannot weaken the bullish rally on the RSI. Though marginally overheated, the ADX (14) does not give any alarming signs about the decline. To determine new levels after the breakout, the flagpole size is added to the breakout level. As a result, by adding $7 ($23 - $16) to $24, the new level of $31 becomes clear.

Thus, the ascending triangle will lead to a bullish rally to $28.



Chaitali Mohile

Active trader in the Indian stock markets since 2003 and a full-time writer. Trading is largely based upon technical analysis.

Company: Independent
Address: C1/3 Parth Indraprasth Towers. Vastrapur
Ahmedabad, Guj 380015
E-mail address: chaitalimohile@yahoo.co.in

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Date: 04/06/07Rank: 4Comment: 
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