Waters (WAT - Get Report) designs and manufactures scientific instruments used in thermal analysis. Shares of the stock lost nearly 12% of their value after the company reported disappointing guidance in its October third-quarter conference call last year. There was some follow-through downside, but the stock price was able to stabilize and form a "W"-shaped bottom with neck line resistance in the $140 area.

That resistance was broken last month, and the stock has returned to the lower end of the gap. This level coincides with the 50% Fibonacci retracement level of the 2016 all-time high and this year's low. There is a vacuum of resistance until the upper end of the gap.

A breakout could fill this 6% void.

The relative strength index crossed over its 21-period signal average last month and has continued tracking higher. Daily moving average convergence/divergence is overlaid on a weekly histogram of the oscillator. It is above its center line on both time frames. The "W" bottom is being bought, and this supports the breakout thesis.

The stock is a long candidate after an upper candle close above the $147.95 level, using a trailing percentage stop.

This article is commentary by an independent contributor. At the time of publication, the author held no position in the stocks mentioned.