Potential Breakout Stock S (Sprint Nextel) 04/26/2011

Early this morning I came across a potential breakout stock, ticker symbol S (Sprint Nextel) while browsing the internet 04/26/2011.

Just yesterday I added a new page to Online Stock Trading Guide on How to Recognize a Breakout so if you haven't read that article yet, do so for some review.

The chart of S (Sprint Nextel) below is showing the same general stock chart pattern as in my previous "How To" article. Take a look at the chart below:

You'll see the same pattern, the Ascending Triangle, and how prices are currently at/near the end of the pattern. This could wind up being another textbook example so keep your eye on S over the next few days/weeks. At the least, you'll be able to see a potential outcome of the pattern, one way or another.

Potential Breakout Stock S Sprint Nextel - 04262011

You can see that an ascending triangle has formed and prices are currently at/near the end of the pattern. The current price level is also a previous strong resistance level (a characteristic of an ascending triangle).

What's been happening over the last several months is that as prices have reached the previous upper resistance level near $5.00, prices have pulled back but on each pullback, the sellers have sold less and less and the buyers have stepped in to buy at higher and higher prices, creating higher lows on the pattern uptrend.

At current price levels and barring no bad stock specific or general market news/action, the sellers have pretty much dried up and any move higher through $5.00 could trigger a spike in buying.

There are a couple of possibilities from here on out, (and with every potential opportunity):

  • Prices may indeed breakout to new highs with the next higher price target level near $10.00 (next strong resistance level. There are other lesser resistance levels in between $5 and $10.00 also which may hold).
  • Buyers may give up and a reversal may occur, sending prices lower out of the finished ascending triangle pattern. This would typically occur along with either bad news from the company itself or a general-overall market decline across the board, pulling all stocks down with it.
  • A sideways consolidation pattern for some time before moving higher or lower.

Three potential movements to be aware of as could happen at any time with any stock. Buyers trying to take advantage of the potential breakout to the upside may think about using a stop loss in case the breakout does not occur, or is actually a fakeout to the upside. There is always the chance of bad news coming out of a company as we all have (or should have) learned over the last few years.

Having a stop loss in place will also protect against a possible fakeout, where prices briefly move up through $5.00 and then reverse. Remember, prepare for the unexpected at all times and have a plan in place beforehand.

Keep this stock on your radar and see how it plays out and maybe it will be a good training example for all of us.

Note: I have no position in S (Sprint Nextel) and have not taken a look at any other technical information nor fundamentals of the company in this article. This article is based only on the potential of a breakout using an ascending triangle stock chart pattern.

Update 06/03/2011: Check out the follow up article I added to review what happened after this article was originally written: Sprint Nextel Update 06/03/2011

Return From "Potential Breakout Stock S (Sprint Nextel) 04/26/2011" To "Stock Market Commentary"

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