SLW: H&S Botttom/Ascending Triangle Breakout

From the July 5 close (34.44) in SLW:

" As the chart stands, SLW is short-term bullish with an Ascending Triangle breakout target of 37.43 IN PLAY."

UPDATE:

The Ascending Triangle target of 37.43 got MADE on July 13.

After the July 7 close, we speculated about the following possibility, seen in the chart above:

"We know that 37.43 is IN PLAY from the Ascending Triangle breakout. We never know whether or not any target will get MADE, but if this one does, or if SLW rallies to anything near it, then pulls back, we've got the possibility of an Inverse H&S pattern that would be larger than the one last winter and a stronger base from which to launch a rally through the Kumo, the top of which currently is at 40.015.

Just a possibility, but it sure would look purdy ;)"

That possiblity played out quite nicely. Here's how the chart looks at this juncture:



SLW ended up stopping during the rally, putting in a neckline and a Right Shoulder, then breaking out above the 37.20-37.14 neckline. The Right Shoulder is very skimpy. Some analysts would view the Inverse H&S pattern as an Ascending Triangle, with the little Ascending Triangle (The Head in this chart) nested within it, which is perfectly fine. Either way, SLW broke out above the 37.20-37.14 trendline on a Breakaway Gap higher.

Notice that the July 5 breakout of the Ascending Triangle also was a Breakaway Gap. When it's a pattern breakout, as that one was, those Breakaway Gaps tend NOT to get filled, prior to the target getting MADE, and sometimes they don't get filled for quite awhile, like the three gaps higher that we've discussed in FCX, nearly one year ago.

Strategy-wise, "it's a good idea to take at least 'some' profits when targets get MADE." The breakout was above 33.64, so taking profits when the 37.43 target got MADE is a nice 11.3% gain from the breakout. That locks in a winning trade with the "logical stop" now raised to below the low of the Right Shoulder, which was the July 11 low of 34.54. Selling there would be another small gain if the stop is taken out. Some players will throw it in if SLW goes back below the 37.20-37.14 breakout on a CLOSING basis. That's "Ye Olde Knuckle-Biter" for The Bulls because it brings into question how bullish the breakout was, especially since it was a Breakaway Gap. That decision is up to the individual trader.

The Breakaway Gap "could" get filled and the 37.20-37.14 "could" get successfully retested and the chart still would be bullish (IF the test is successful), but it's much more bullish if the gap is left open. That's the purpose of a Breakaway Gap. No one "should" be allowed to have the stock at prices below 37.20, which was the case after the Ascending Triangle Breakway Gap. If anyone wanted the stock after it gapped up from 32.47 on July 5, following the trendline validation at 31.78 on July 1, they had to "pay up" to get it, which is as it should be. That's part of what made the Ascending Triangle breakout so bullish. Everyone was locked out of those July 1 "island prices" when the stock gapped up on July 5 for a Bullish Island Reversal AND an Ascending Triangle breakout. Quite nice ;)