Another reversal is shaping up in shares of EMC (EMC), which is currently forming a double bottom pattern, a setup that's formed in a downtrending stock by two swing lows that hit a floor at nearly the same place. The breakout happens when shares can move above the high that separates those lows. For EMC, that happened last week.
Now, regular readers of this column know that lines on a chart do not a trade make. There's no mysticism at work here. Instead, the breakout level is significant because it's a price where there had been a glut of supply of EMC shares; enough of a glut of supply to reverse prices as recently as early July. A move above that price indicates that the supply has been absorbed by increasingly eager buyers, and one potential stumbling block for EMC's price has been taken out.
After breaking out of the pattern, shares have been consolidating just above that breakout level, a price that's now going to start acting as support for EMC. That combination of a recent breakout and nearby support gives investors a high-probability trade with limited risk right now. I'd recommend buying here with a protective stop right at the 200-day moving average.As of the most recently reported period, EMC was one of Ken Fisher's top holdings.
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