We're seeing the same pattern in
) right now, believe it or not.
I haven't had many nice things to say about Facebook lately. And since the start of 2013, I haven't had much reason to -- this stock is underperforming the S&P by around 21% since the calendar flipped to 2013. That's huge. But now, an ascending triangle bottom in shares is signaling the possibility of some upside.
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I talked about Facebook, it was forming a slightly different pattern, but it's evolved into an ascending triangle bottom at this point. Whatever you call it, the trading implications are exactly the same: a breakout above $25 resistance is a buy signal for shares. $25 has been an important level in FB historically -- it was a (temporary) floor for shares back in late March. Now it's a critical level again.
Whenever you're looking at any technical price pattern, it's critical to think in terms of buyers and sellers. After all, triangles, channels, and head and shoulders patterns 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.
FB's resistance level at $25 is a place where sellers have recently been more eager to keep selling than buyers have been to build a position in the stock. But a move through $25 indicates that buyers have finally gained enough steam to absorb all of the excess supply there. That's what makes it a buy signal.
Don't put cash in the "social network" until that happens.