A successful retest of a former pattern breakout level is often a more reliable way to enter a trade than buying an initial breakout.
Here are three stocks that are poised to move higher, after bouncing off former pattern resistance-turned-support levels.
The weekly chart of biopharmaceutical company BioMarin Pharmaceutical (BMRN) shows the stock breaking below an uptrend line in March this year, then trading in a wide channel with the $66.70 breakdown level acting as resistance. This level was also a 38% retracement of the 2014 range and was being reinforced by the 200-day moving average. In August the stock took out these multiple layers of resistance and moved back up to 62% retracement level in the $73 area.
This week it dropped back to retest original channel support and has bounced back up to the 50% retracement level and the 50-day moving average. If the stock closes out the week at or above its current level and forms a strong hammer candle, it would be a long candidate with an initial stop under the key resistance-turned-support level.
Shares of women's specialty apparel maker L Brands (LB) have been trading in a rising channel for most of the year. In August they broke above pattern resistance and their 2013 high before pulling back this month to an intersection of the former resistance levels. This area, along with the rising 10-week (50-day) moving average is now supplying support. The price momentum indicators have continued to track higher and Chaikin Money Flow is reflecting strong accumulation in the stock. A weekly close in upper candle range is a long entry point with a trailing percentage stop under the 10-week average.
Regeneron Pharmaceuticals (REGN) traded in a wide channel consolidation between March and July this year. It broke above channel resistance and rallied to a perfect pattern target price projection, before leveling off and moving sideways in a two-tiered channel pattern. The stock price was hit hard over the last two weeks, returning it back to the original channel breakout level in the $320 area. Over the last two days it has bounced strongly off that level, moving back up to the lower end of the smaller channel. The momentum indicators have not caught up with the move, but a close in upper candle range with an initial stop under the $320 resistance-turned-support level is a good long entry point.
At the time of publication, Moreno had no positions in any of the securities mentioned.