|ATI Monthly Wave|
The volume pattern is showing signs of strength as well. The amount of supply that entered the scene in the last downward move shows evidence of climactic activity, and the subsequent upward monthly candles are increasing in intensity.
The price is now trading in the resistance zone, so we're watching this stock to see if it will break to the upside or retreat back towards support and the bottom of the triangle pattern.
|ATI Weekly Chart|
The fact that we closed in the resistance zone does raise the odds for a pullback. If that occurs - and it occurs 57% of the time in an ascending triangle upward breakout - then we will watch for how well the triangle top - now a support line - holds. Remember, we're not long-term traders, so we're using the weekly chart to gauge the directional trend, allowing us to enter short-term swing-trades in the direction of that trend. So understanding the pressures imposed on the monthly and weekly charts improves our odds of entering a short-term trade in the same direction as the longer term trend.
Looking at the RSI(9) oscillator on the weekly chart, we've had consistent signals in support of the overall price movement. This week's RSI(9) close, however, is a bit troubling. Given the strength of the overall move, this week, a higher move in the RSI, preferably above 70, would have provided stronger confirmation of the breakout. Instead, the RSI closed at the same level as the prior peaks that retreated from the resistance line of the triangle. That's a sign of weakness that may be a harbinger of a pullback, at least to support. Keep an eye on it.
|ATI Daily Chart|
That break, on the highest volume on the chart, also occurred on a strong breakaway gap. It was better than expected earnings that created the gap, however the 15-month high is seen as a strong positive for the stock. The remainder of the week created the next pattern in which we have significant interest. We're in a tight bull flag pattern now and still showing more strength than weakness. Thus far, there's been no attempt to retreat as low as the bottom of Tuesday's wide-range candle, and certainly no attempt to close the gap.
In the months leading up to this week's move, On Balance Volume began a steady but gradual rise, indicating that subtle accumulation was occurring over the long term. The RSI(9) on the daily appears to be in agreement. The oscillator began to show signs of strength a month or so before the earnings announcement, again indicating increased interest in the stock. The spike in price saw a corresponding spike in the RSI, and it continues to run strong.
We show two separate price targets on the chart. The green target Fibonacci extension is the price target for the ascending triangle breakout, and the melon Fibonacci extension is the price target for the bull flag assuming it breaks to the upside. The area we will set for our actual target is where the 100% triangle extension and 61.8% bull flag extension overlap. So we're looking at a conservative target in the $25.60 range.
We will trade this stock as a traditional bull flag. The entry will be long once the stock closes above the flag on confirming volume. The stop will be just below the flag and the target will be $25.59. We'll wait for that close above the flag, however, since we still need to be wary of a potential pullback to support that closes the gap. Overall, however, this appears to be a solid setup with a good probability of success.