Satellite communications firm ViaSat ( VSAT) is showing off the exact same setup right now -- it's just earlier on. Shares of the $2 billion satellite firm broke out back in February on good earnings numbers, but the stock has been consolidating sideways in a rectangle ever since. Now a test of $49.50 resistance is close to triggering a buy.
Yesterday, VSAT closed above resistance for the first time, a bullish sign. It's still a little early to call the breakout confirmed -- today's trading session should say a lot about the significance of yesterday's move. If shares remain above $49.50 for the entire session today, I'd call the pattern confirmed.Whenever you're looking at any technical price pattern, it's critical to think in terms of buyers and sellers. Triangles, rectangles and other pattern names are a good quick way to explain what's going on in this stock, but they're not the reason it's tradable. Instead, it all comes down to supply and demand for shares. That resistance line at $49.50, for example, is a price where there's an excess of supply of shares; in other words, it's a place where sellers have been more eager to take recent gains and sell their shares than buyers have been to buy. That's what makes the breakout above it so significant -- it indicates that buyers are finally strong enough to absorb all of the excess supply above that price level. Waiting to see that sellers are gone increases the probability of a successful trade, even if it means leaving some potential profits on the table.