AU Optronics Corp.
Taiwanese flat panel display maker AU Optronics Corp. (AUO - Get Report) is forming a similar setup right now. Just like FSLR, AUO is sporting horizontal resistance just above $4 and uptrending support below shares. Unlike FSLR, though, AU Optronics is testing a breakout above its resistance level this week -- here's how to trade it.
First, it's valuable to think about how this pattern works in real terms -- after all, patterns like the ascending triangle don't work because of magic or geometry. Instead, it all comes down to supply and demand in the market. The resistance level at $4 and change is a price where sellers have recently been more eager to sell and take gains than buyers were to buy. But a breakout above that level indicates that all of the excess selling pressure at $4 has been absorbed by increasingly committed buyers.
That's why it makes sense to buy a breakout through a resistance level.Momentum, measured by 14-day RSI, adds some extra confidence over this trade -- momentum has been in an uptrend since back before shares made their bottom in August, and it remains in one. Since momentum is a leading indicator of price, that's a good sign for AUO bulls. I'd recommend waiting to see if shares follow through in today's session before jumping into this trade.