The trade we have on watch today comes from a stock and pattern we don’t talk much about. However, the pattern being put in by United Rentals (URI) is one every trader should know for there own sake. But first, let’s familiarize ourselves with the context in which we are seeing it.
After briefly making a new 52-week high of just over 490, URI came crashing back down toward the 400 level, but not before starting to form our inverse head and shoulders pattern along the way. Currently, the stock is making its way back 455, a key level if the stock can get a close above, from the low of right around 415.
This inverse head and shoulders is bullish reversal pattern that signals the stock is definitely on the move after pivoting off 415 or so and bouncing upward to current prices. If we can get that close above 455, then odds are the we get a run higher.
However, the overall market will have a say in all this. If the broader market decides to hold steady or take off higher, the probability of this stock making another move higher are greatly increased. If the market begins to collapse, then this stock will likely follow suit.
This pattern, or any for that matter, are not guarantees of the move they imply, but there are clues traders can use to help them plan their next trade. When these patterns are so easily spotted, it’s highly likely that we aren’t the only ones that can see this pattern form, which bodes well for us and the implied move we are expecting to see.
Now, there are such things as false breakouts and breakdowns that we want to be careful of. One rule of thumb I have begun to teach my students is if you’re certain of a move coming, just wait until the next candle closes. Many times have I entered a trade based on my certainty of the coming move only to be stopped out by the very next candle.
The key lesson to learn here is patience, or as I like to call it…
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