Get Ready to Jump on This Breakout Trade

Hey There Income Hunters,

Here’s a secret … I use triangles to identify sideways consolidation patterns that may be close to completion and ready to breakout.

What does that mean?

Basically, trading chart triangles are an indicator that give me an edge. 

Why? Because they often point to a breakout continuation of a stock’s recent performance.

I never want to waste time and money getting chopped up in a corrective trading range … so I let the pattern develop.

Once a triangle is forming, I monitor it more closely and wait for a set-up I can lean on.

Triangles are great tools because they provide a structure to trade against with clear entry points, profit targets and stop-loss levels.

I’ll run through both ascending and descending triangles and show real examples of each.

Read this graphic first …

Enbridge (ENB) is a current example of an ascending triangle.

They also happen to be an excellent company in a sector that has been undervalued and is starting to trend higher. 

The fact that Morningstar has fair value 26% above the current price at $45 provides additional confidence on a continuation breakout.  

Playing the Enbridge Triangle

A breakout to the upside would occur above $34.28.

Depending on when it happens, your stop would be a breakdown below the bottom, ascending trend line.

Your profit target would be the width from the lowest point of the triangle to $34.28, which is roughly $7.

Now, let’s take a look at a descending triangle, which is much like an ascending triangle, just heading the other way …

A Recent Down Trade I Made in GLD

I caught an excellent down trade in GLD in November.

After a significant rally in GLD fueled by the Fed, I noticed the Fed put stimulus on hold, telling me GLD could correct. 

Sure enough, GLD traded off, broke below the 200-day moving average and formed a descending triangle.

I waited for a clear break and purchased puts on GLD.

I purchased the 173 Puts and two days later closed the position for a 90% return (or 16,000% annualized return).

Bring It Home

You want to have a tool box of technical indicators that help identify opportunities and, more importantly, help you manage your trades.

Classic patterns like triangles are extremely helpful.

I’ll share many more as real trades come along that prove the point. Maybe we’ll even start up #TechnicalTuesday!

Ping me with any questions. Until then …

Live & Trade With Passion My Friends,

Griff


DISCLAIMER: FOR EDUCATIONAL AND INFORMATION PURPOSES ONLY; NOT INVESTMENT ADVICE. The materials presented from Option Pit LLC are for your informational and educational purposes only. Neither Option Pit LLC nor its employees offer investment, legal or tax advice of any kind, and the analysis displayed with various tools does not constitute investment, legal or tax advice and should not be interpreted as such. Using the data and analysis contained in the materials for reasons other than the informational and educational purposes intended is at the user’s own risk. 
DISCLAIMER: OPTION PIT LLC IS NOT AN INVESTMENT ADVISOR OR REGISTERED BROKER. Option Pit LLC is not responsible for any losses that may occur from transactions effected based upon information or analysis contained in the presented materials. Specific trading ideas or strategies discussed in the presentations or materials are entirely illustrative and do not constitute the solicitation of a transaction (or transactions) or a recommendation to execute a particular transaction or implement a particular trading strategy.
DISCLAIMER: TRADE AT YOUR OWN RISK; TRADING INVOLVES RISK OF LOSS; SEEK PROFESSIONAL ADVICE. To the extent that you make use of the concepts with the presentation material, you are solely responsible for the applicable trading or investment decision. Trading activity, including options transactions, can involve the risk of loss, so use caution when entering any option transaction. You trade at your own risk, and it is recommended you consult with a financial advisor for investment, legal or tax advice relating to options transactions.

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