An ascending triangle in shares of Vectren (VVC - Get Report) is telling traders that shares of this energy holding company present upside potential right now. An ascending triangle takes place when a stock's price action is bounded by a horizontal resistance level to the upside, and an upward trend line below. As shares of VVC get squeezed closer and closer to that overhead resistance level, the chances for a break above that price become significantly greater. The buy signal comes on a move above resistance; in VVC's case, we're looking for a move above $27.
When trading technical setups, one of the most difficult factors in any trade is waiting for confirmation of a breakout. Confirmation is the signal that a breakout is more than just an intraday whipsaw. It's clear that shares of VVC have moved above $27 before without fully breaking out, so how do you know when to take the trade? One of the best indicators will be an open above $27 followed by higher price action in the morning hours.
That price behavior signals that the overhead supply of shares at $27 has been absorbed by eager buyers, and that the upside barrier is no longer effective. If you do decide to take this trade when and if it triggers, keep your protective stop below nearest support at $26.-- Written by Jonas Elmerraji in Baltimore.
Twitter and become a fan on Facebook. At the time of publication, author had no positions in stocks mentioned. Jonas Elmerraji, based out of Baltimore, is the editor and portfolio manager of the Rhino Stock Report, a free investment advisory that returned 15% in 2008. He is a contributor to numerous financial outlets, including Forbes and Investopedia , and has been featured in Investor's Business Daily , in Consumer's Digest and on MSNBC.com.