Buy the Shake Out or the Break Out - Consolidation Patterns for Upside

Trading UPST & FTNT - Poised for New Highs in the Near Future.

Study patterns long enough and you start to identify them quickly.

Trade them long enough and you learn which patterns work best for your style of trading.

Consolidation patterns offer multiple entry points which why tickers going into this “barcode mode” are worth monitoring and often trading.

I always prefer to trade with the trend and that remains true for trading out of a consolidation. If a stock was moving up before starting a sideways pattern I am taking an upside breakout trade with more conviction than a downside trade.

The chart will tell me which direction to choose but my bias is to stick with the trend until it is firmly broken.

This week, the chart for FTNT caught my eye because of its recent consolidation period that followed a huge move from below 80 up to test 100.

You can see the retest in December and then today’s tap of the 100 level. I think we are about to see a breakout here and I like the idea of trading it.

The relative strength index (RSI) at the bottom of the chart has moved up beyond the midpoint, not a bad sign.

More interesting is the huge volume spikes that started in November following earnings. This kind of volume is often followed by additional buying to fill out the positions the institutional buyers started with these big buys.

Higher lows that are all above the 50-day simple moving average (SMA) are also giving me bullish ideas for FTNT.

That is ticker number one that I will be detailing trade ideas for this week.

Ticker number two is none other than UPST. This is a name that is either loved or hated.

As a trader, it is best to just focus on the chart. Take a look at this one for UPST.

Another example of a big gap up post earnings followed by a consolidation period that I would like to trade for more upside.

Instead of waiting on the breakout there is another entry you can take, which is to buy the shake out. This is when the candles briefly dip below the consolidation zone.

This could be viewed as a riskier entry because the candles are showing some weakness. I always recommend a tight stop loss when buying the shake out dip.

That said, I like taking an entry here and if the price action breaks back above the lower bound I will be looking for a steady climb back to the top of the recent range.

The options contracts for UPST can be a little tricky. They often get too expensive for my liking but currently the price is right so I’m considering this trade which I’ve outlined in detail below.

If you are interested in weekly options trade ideas with entry levels, profit targets, stop loss levels, and contract details you can have it all for only $8.