We're seeing the exact same ascending triangle setup in shares of engineering firm KBR (KBR). Like AAP, this stock is seeing a horizontal resistance level above shares at $32, and an uptrend on the lower end of shares' range. The breakout above $32 is the buy signal in KBR.
With any technical pattern, it's critical to think in terms of buyers and sellers - not shapes. After all, triangles, head and shoulders patterns, 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 $32 is a place where a glut of sellers has been willing to step in and put a ceiling in the stock. A breakout would mean that increasingly eager buyers have absorbed all of the excess supply of shares sitting at that level -- and without that barrier in place, shares could rally much higher than that.That's why it makes sense to buy KBR on a push through $32. To see this week's trades in action, check out this week's Must-See Charts portfolio on Stockpickr. -- Written by Jonas Elmerraji in Baltimore.
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