Thanks again to our friends at Bullogic for this week's trade of the week.
If you missed last week's trade, you can check it out here: June 10 trade recap.
C&J Energy Services Inc. (CJES) Geared Up For A Big Run
C & J Energy Services Inc. (CJES) has hit our radar today with a nice consolidation chart pattern setting up for a breakout. Here at Bullogic we are always on the lookout for High Reward/Low Risk trades to get into and it would appear CJES fits that bill.
Let's spend a moment talking about consolidation patterns (triangles in general). Typically a triangle is formed after a big run (either up or down) caused by a catalyst such as earnings or big news. After the run or gap peaks the stock will begin to move sideways, and as the days go by the movement in the stock will begin to get less and less as the triangle gets narrower. This sideways movement usually forms over several weeks as the buyers and sellers reach an equilibrium on price. As with most triangles we want to see this consolidation happen on low volume. The entry on consolidation patterns is when the trendline breaks (up or down). Targets will normally be the top (long) or bottom (short) of the triangle and stops always go under the nearest or strongest support.
Now lets look at the numbers for CJES. We will enter/buy this trade at $19.50 at the breakout of the trendline. Our first target will be the top of the triangle at $20.25, second target is the 200 day moving average at $20.83. You'll have 3 options for your stop:
- First under the 50 day moving average support at $19.16 that offers us a risk/reward ratio of 1 to 2.21
- Next is a stop under the 20 day moving average at $19.02 - risk/reward 1 to 1.56
- Lastly a stop under the lower trendline support at $18.85 for a 1 to 1.15 trade.
- Want to know how we figured out risk/reward? It's easy with our Bullogic Position Sizer
We will use $19.16 as our stop here at Bullogic.
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