Triangles in Tech

0
818

This post is for education purposes only and should not be interpreted as a trade recommendation.

Today let’s check out some triangles in tech.

Stocks sometimes have “continuation patterns.” That’s when they’re rising or falling over the longer term, but pause and move sideways for a month or two. During that period of consolidation, technicians watch for certain technical patterns that may suggest the bigger trend will continue.

Ascending triangles are one of the most common patterns for bullish trends. They involve a flat line across the top and a series of higher lows. Each time the shares probe resistance, they gets closer to breaking out. For a textbook example of this pattern look at the Semiconductor ETF (SMH) bucking $88 in the summer before ripping toward $100:

Semiconductors ETF (SMH)

Semiconductors ETF (SMH) with triangle marked.

It just so happens that several big names in the technology sector are currently showing similar patterns. The good news for options traders is that they all have average volume of more than 20,000 option contracts a day, which may provide tighter pricing on the calls and puts. Remember liquidity is key in the options market.

The first one is semiconductor superstar Nvidia (NVDA). It’s been riding a wave of strong results, new product growth and rampant enthusiasm toward the chip-making industry. The flat-line resistance level is around $250, with higher lows around $204 and $222. Interestingly NVDA also had a very clear triangle and breakout in December and January:

Nvidia (NVDA) chart

Nvidia (NVDA) chart with triangles marked.

Visa (V) is next. (Believe it or not, the credit-card processor is considered a tech and not a financial.) The fundamentals are similar: strong results, a broad secular growth story and a healthy economic cycle. V, which presents at the Barclyays Emerging Payments Forum tomorrow, has been pushing $125.

Visa (V) chart

Visa chart with triangle marked.

EBay (EBAY) had all kinds of good news on February 1. Not only did earnings beat amid a series of positive initiatives, but management also ditched long-term partner PayPal (PYPL). Now those services will move elsewhere, opening the door to more profit. Its resistance level is $44, with higher lows around $40.50 and $42.

EBay (EBAY)

EBay chart with triangle marked.

PYPL presents at the Barclays event today. It plunged below $80 on that EBAY news, but now is clawing its way back:

PayPal (PYPL) chart

PayPal (PYPL) chart with triangle marked.

Finally, Microsoft (MSFT) appears to have broken the top of a triangle around $95.50.

This post is for education purposes only and should not be interpreted as a trade recommendation.

Advertisement #1 Trading Platform Technology - 8  years running!

Previous articleStrategies: The Heart of TradeStation
Next articleDon’s Notebook March 13, 2018
David Russell is VP of Market Intelligence at TradeStation Group. Drawing on nearly two decades of experience as a financial journalist and analyst, his background includes equities, emerging markets, fixed-income and derivatives. He previously worked at Bloomberg News, CNBC and E*TRADE Financial. Russell systematically reviews countless global financial headlines and indicators in search of broad tradable trends that present opportunities repeatedly over time. Customers can expect him to keep them appraised of sector leadership, relative strength and the big stories – especially those overlooked by other commentators. He’s also a big fan of generating leverage with options to limit capital at risk.