A long-term coiling process has formed a large symmetrical triangle on the weekly chart. This price action reflects a series of wide-range lower high and higher low swings reverting around the 50% Fibonacci retracement level of the 2013 low and the 2014 high. Currently, this retracement level is supplying resistance to an interior consolidation pattern that is further compressing price.
The daily chart shows a second triangle that has formed over the last three months, defined by a downtrend line drawn off the highs since April that is intersecting with the weekly 50% retracement level and by a horizontal support line that is intersecting with the weekly triangle support line. The green Bollinger band lines, which measure standard deviation around price, have moved inside the red Keltner channel bands, which measure standard deviation around average true range. This, along with the reading on the Bollinger bandwidth indicator at the bottom of the chart, is a sign the stock is being "squeezed," a condition that is usually resolved by a volatile move in price.
The relative strength index is moving above its center line, moving average convergence/divergence is tracking higher, and Chaikin money flow shows recent buying interest in the stock. These are technical indications that have a slight bias to the upside, but waiting for a break above $168.00 resistance to get long or a break below $155 support as a speculative short entry point would be a prudent way to play a volatile reaction to the earnings news. In either case, use a close trailing percentage stop.
This article is commentary by an independent contributor. At the time of publication, the author held no positions in the stocks mentioned.