Another channel worth watching right now is the horizontal consolidation channel that's been reigning in price action in shares of Ecopetrol (EC - Get Report). Unlike the channel up, a sideways consolidation channel doesn't have any directional bias -- that's why I like to refer to them as "if/then trades."
Because price movement is sideways, it doesn't make sense to take a position while shares trade within the channel. Instead, it's best to wait for a breakout in either direction -- here's where the if/then element comes in. If shares break above resistance, go long; otherwise, if shares tumble through support, this becomes a short play. Either way this trade pans out, consider a protective stop just inside the channel.
To see these plays in action, check out the Technical Setups for the Week portfolio on Stockpickr.-- Written by Jonas Elmerraji in Baltimore.
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