London-based advertising and PR firm WPP Group (WPPGY) has seen some impressive performance of its own in the last six months. Shares of the $20 billion stock have rallied more than 25% over that time. Since then, they've taken a breather, trading sideways since early February. But even though WPP hasn't seen much excitement in the last couple of months, there's still a trade to be made here.
That's because WPP's sideways churn has been extremely orderly. In fact, trading has been constrained within a rectangle pattern since the uptrend turned sideways. A rectangle is a pattern that's formed by two horizontal price levels: in this case, resistance above shares at $82 and support below at $78. Rectangles give traders a chance to take a breath and figure out their next move after a big share price change. As a result, it makes sense to make a bet in the direction of the breakout from the channel.While WPPGY has a large number of gaps in its price chart, traders should pay too much attention to them. Those gaps, called suspension gaps, are the result of WPPGY's off-hours trading on the London Stock Exchange; they can be ignored for technical analysis purposes. Since this consolidation is coming after a prolonged uptrend, WPP looks likely to resume upside once this rectangle has run its course. I'd recommend keeping a close eye on $82.
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