Intel breaks out of its bullish pattern & could still provide a profitable trade

Intel has broken out of the bullish Falling Wedge reversal pattern detailed on 247bull.com two weeks ago, and this article provides an update on what could still be a profitable trade.

For the past four months Intel has been in a defined downtrend. As detailed two weeks ago however, during its decline the stock traced out a bullish “Falling Wedge” reversal pattern, and it has now broken out of that chart pattern to the upside.

The 5 December article showed the following chart and suggested that, “those looking to profit from this potentially bullish chart pattern could do so by going long a breakout that was accompanied by a significant increase in volume”.

A 6 month chart of Intel Corp. (5 Dec chart) (Click on the chart for a larger version)

intel-5-Dec-2012

Chart courtesy of stockcharts.com

The actual breakout (which can be seen on today’s chart below), was not accompanied by especially large trading volume, however this can be explained by low liquidity which is typical of the pre-Christmas trading period.

A 6 month chart of Intel Corp. (Click on the chart for a larger version)

A 6 month chart of Intel Corp. (Click on the chart for a larger version)

Chart courtesy of stockcharts.com

The price target for the breakout, which is calculated by adding the widest part of the wedge onto the breakout price, has been revised upward to reflect the higher than anticipated breakout level. The potential short-term target for Intel is $22.50.

The general lack of market participation could trigger unusually large price swings. It is therefore advisable to keep a tight stop, especially since liquidity and trading volume are unlikely to return until the new year. A sensible level for a stop loss is around the $20.00 to $20.25 area, just below $20.35 where the price found support on the 14th and 17th.

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