SLM Holding (SLM) is showing the same setup as Lennar right now, it's just not as far along. Like LEN, SLM is forming an ascending triangle pattern, in this case with horizontal resistance at $17.75. The key difference is that SLM hasn't broken out yet, giving traders a chance to get in earlier after the initial breakout. Even so, it's important not to be early.
With any technical pattern, it's critical to think in terms of buyers and sellers -- not shapes. After all, triangles, wedges, and the like are a good way of describing what's happening on a chart, but they're not the reason why it's tradable. Instead, that all comes down to the supply and demand caused by those buyers and sellers.
The horizontal resistance level at $17.75 in SLM is a place where sellers have previously been more eager to sell and take gains than buyers have been to keep buying. But uptrending support tells us that buyers do have some control over shares at lower levels. The breakout means that buyers were able to absorb all of the excess supply of shares that was sitting above $17.75. Without that price barrier above shares, only then does it make sense to be a buyer.Bottom line: Don't be early on this trade.
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