Bullish Flag Pattern Forms In Chart Of Al Sorayai Trading
Bruce Powers | Mar 03, 2015 05:02AM ET
A bullish flag pattern has formed in the chart of Al Sorayai Trading&Industrial Group (SE:1213) (ALSORAYAI), with the stock attempting a breakout over the past few days. The bullish flag is a consolidation pattern that takes the form of a small descending parallel channel. It follows a clear bullish move.
Three weeks ago ALSORAYAI hit resistance at 19.45, the top of the flag, and also completed a 38.2% Fibonacci retracement of the downtrend coming off the 27.80 swing high. It then retraced off that high until finding support at 17.65 two weeks ago, thus forming a flag pattern. The quality of that low is enhanced as it is also in the region of the 21-day exponential moving average (ema). As of the past couple of the days the 21-day ema and 55-day ema have converged and now identify the same price support area of approximately 18.12.
A bullish breakout is indicated on trade above 18.95. At that point the stock will be back above the 38.2% Fibonacci retracement (18.87) and the 21-day ema will have risen above the 55-day ema for first time since the beginning of October 2014. The 14-period RSI is at 57.06; not yet in overbought territory.
Further confirmation of the breakout is on trade above the 19.45 peak, which will also trigger a continuation of the uptrend.
There are two more apparent target zones if a breakout and subsequent follow-through occurs. The first would be from approximately 20.20 to 20.58 (6.6%+ above breakout), the target measured from the flag pattern, and the 50% retracement level, respectively.
If Alsorayai keeps going higher from there then the next target zone would be from around 22.28 to 22.70 (17.6%+ from breakout), which is the confluence of the 61.8% Fibonacci retracement and previous support and resistance that occurred over the course of few months in 2014.
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