We're seeing almost the same setup in shares of Weight Watchers (WTW). Like FBHS, Weight Watchers is forming an ascending triangle, with one big caveat: the ascending triangle setup in Weight Watchers is coming at the bottom of a downtrend instead of the top of an uptrend. Even so, the trading implications for both stocks are the same. In WTW's case, the buy signal comes on a breakout above $57.
When you're looking at trades like WTW or FBHS, it's important to think about them in terms of buyers and sellers. After all, patterns like the rectangle don't work because of magic or geometry. Instead, it all comes down to supply and demand in the market. That resistance level at $57 is a price above which there's a glut of supply of shares (it's a place where sellers are more eager to sell and take gains than buyers are to buy). That's why a move above that level is a buy signal -- if WTW can print above $57, it means that increasingly eager buyers have absorbed all of that excess supply that was sitting overhead.
It's worth noting that this could be more than just a short-term pop for WTW -- instead, it could be the start of a new major trend. That's because the 50-day and 200-day moving averages are both starting to roll over and turn higher. The move above $57 would also create a bullish moving average crossover, an added piece of confirmation for upside in this stock. With all of that in mind, it's critical to wait for the breakout before buying...
Select the service that is right for you!COMPARE ALL SERVICES
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV