Shares of Travelers (TRV) - Get Report have been tracing out a very narrow consolidation pattern since late April. Just prior to the beginning of this healthy sideways action, the stock suffered a very damaging earnings-inspired breakdown gap. As a new week begins, TRV is now on the verge of a fresh rally leg. Patient investors should take on a more positive view of the stock in the near term.
Back on March 1, TRV reached new 52-week highs with the help of a 2.25% gain. The stock took out a very heavy resistance area near $123.00 that day but was unable to extend the gains. A week later, TRV began to fall below support and had left behind an ominous failed breakout. The stock continued to trade rather heavy heading into earnings and was on the verge of a new down leg after the April 20 report. Instead, the stock's 200-day moving average held in extremely well resulting in a powerful spike low. TRV has been building a solid base since and is now set up well for a breakout.
In the near term, TRV investors should consider the stock a low-risk buy near current levels. At mid day, the stock is headed for its best close of the month as it begins to pierce a key overhead trend line that links the March/April highs. Once the $123.00 area is clearly taken out, there is plenty of room for the stock to run. On the downside, a close back below $119.00 would indicate more sideways movement is on the way before a new rally leg can take hold.