Lions Gate Entertainment
$5 billion film studio Lions Gate Entertainment ( LGF) hasn't done a lot in the last coupe of months, but that doesn't mean its not tradable. Right now, LGF is forming a rectangle pattern, a consolidation setup that's formed by a horizontal resistance level above shares at $37.50 and horizontal support below them at $34. The rectangle pattern gets its name because it basically "boxes in" shares between those two levels -- the signal to watch is the break outside of that box.
A move through $37.50 is a signal that it's time to be a buyer in Lions Gate, while a breakdown through $34 means that it's time to sell.Whenever you're looking at any technical price pattern, it's critical to think in terms of those buyers and sellers. Rectangles, triangles, and other pattern names are a good quick way to explain what's going on in a stock, but they're not the reason it's tradable - instead, it all comes down to supply and demand for shares. That $37.50 resistance level is a price where there has been an excess of supply of shares; in other words, it's a place where sellers have been more eager to step in and take gains than buyers have been to buy. That's what makes a breakout above it so significant -- the move means that buyers are finally strong enough to absorb all of the excess supply above that price level. Don't be early on this trade.
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