Reed Elsevier

The exact same setup is shaping up in shares of London-based specialty publisher Reed Elsevier ( RUK). Like SNY, Reed Elsevier has been rallying since June, climbing more than 30% since the start of the month.

And also like SNY, this stock has been consolidating sideways in a rectangle since the beginning of fall.

In Reed Elsevier, the resistance level at the top of the rectangle comes in at $40, and support is at $38.

So, the same if/then rules apply: if RUK breaks out above $40 resistance, then buying pressure has overcome a pocket of gains-taking sellers, and traders have a buy signal.

Otherwise, if shares of RUK fall down below $38 support, then it becomes a short candidate.

Either way these two trades resolve, I'd recommend keeping a protective stop back just within the rectangle after the breakout happens.

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