earlier in the week I blogged about Mitsubishi Electric as an ascending triangle in the making. One of the things of note with this trade was the length of time that the S/R level had been running and also how many times there had been historical turning points at around this level.
Today we have seen the price break strongly out of the pattern with a decent sized gap which is generally seen as a positive. Not as great was the fairly subdued volume but that doesn’t necessarily represent a major problem.
I think with this particular setup traders would be looking to place stops at around the 725 mark which I think covers much of the higher end trading that has occurred within the pattern. The initial profit target on this trade would be about 932 based on standard measuring rules. At these levels that would be a risk:reward ratio of about 1:3 which is typically what traders are looking for when it comes to this type of pattern trade.
Keep in mind of course that the broader trend has been weak for some time and that means that we may not see an immediate switch in trend though in any case the price will now make a new higher peak which does point toward a trend shift.
All the best,