Over the weekend I ran across a name I barely knew was still in business. I was having a discussion with someone about earnings season and remembered one of my most profitable (lucky) earnings trades of all time.
It was summer / fall of 2017 and Shutterstock $SSTK had been consolidating in what was to become an Island Reversal Pattern. For those not familiar with these patterns, they are easy to spot but don’t show up all that often. All you have to do is look for a consolidation or grouping of days (or weeks) followed by gaps in price on either side of that grouping. (See $SSTK below)
The Island Reversal is highlighted in green. You can see that the price grouping is out on its own, separated by gaps both previous and subsequent to it. If you want more information about the characteristics of this pattern, I linked to more about it above.
The point of the post is not to teach you about a random technical pattern less than 3% of the population has ever heard of. The point is to show you what this stock is doing both as we speak, as well as what it has been doing since its IPO.
Staying with the theme of price patterns in technical analysis, let’s take a look at one more much more recognized pattern: The Symmetrical Triangle.
Definitions are no fun, pictures on the other hand…
Again, if you want to dig into this pattern and its characteristics, you can click the link above. If you want me to cut to the chase because this is all elementary for you here we are…
Take a look at this massive triangle that $SSTK has been building out for the better part of 7 years:
There are a couple of different ways this could be drawn, but I think this serves us well for now. What is the point you ask?
Price is nearing the apex of this triangle. In other words, we find ourselves in the in the late innings of this particular price pattern; one which us technicians know can and will lead to explosive price movements once the breakout occurs. When might that breakout occur? We are currently sitting about one month out from its first earnings announcement of the year. If it can wait that long, I think that is a pretty good guesstimate as to when $SSTK will break out and head much higher (my personal bet), or break lower heading back toward its IPO price.
Since I have been away grading level III CMT Exams this post was a two for one: You learned a couple technical patterns and were introduced to a trade I have been in for a while, placing my bet on higher prices (much higher) later in 2020.
I’ll be back soon. Promise.
Trent J. Smalley, CMT