A “Wynn-ing” Stock

01/14/2014 6:00 am EST


Corey Rosenbloom

Founder and President, Afraid to Trade

Just like Newton's Law, stocks in strong trends generally tend to get stronger over time as opposed to weaker, says Corey Rosenbloom of AfraidtoTrade.com, as he takes a technical look at one example.

Wynn Resorts (WYNN) remains a stellar example of our "strong stocks getting stronger" swing trading strategy as shares cleared the $200 per share barrier.

Let's take a look at the stock and pay close attention to the famous "parabolic arc" or "arc trendline" structure developing on the weekly chart:

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A "pure price" chart overview clearly shows the lengthy "arc" or parabolic price action starting with the mid-2012 low.

Just like normal (horizontal) trendlines, we can also connect price highs and lows with "arc" trendlines like these to get a clearer picture of the supply/demand relationship over time (key price levels that have been important).

The broader price pattern structure also assists with swing trade planning strategies (the same way we would use "normal" trendlines-both for trade entry/management and target planning).

We can see a different perspective of the arc when we add our standard indicators to the chart:

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While volume has steadily declined over time (at least from the mid-2012 low), we can see momentum as seen from the 3/10 oscillator steadily increasing, which confirms each new price high (seeing price and momentum form new highs—a confirmation—suggests that the trend will likely continue and that retracement strategies are favored).

Indeed, shares have doubled from the $100 area to Wednesday's breakout above $200 as the trend continued.

A glance at the daily chart shows additional short-term trading parameters and structure:

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There's even a smaller "arc" pattern trendline or "arc" formation to price starting with the swing down from April's high toward July's low and up from there.

Again, in a pro-trending environment, bull flag (retracement) or aggressive breakout strategies are favored.

In addition, we can see from the zoomed-in daily chart that volume—along with momentum—similarly confirmed the uptrend, particularly throughout the latter part of 2013.

Continue watching shares for this ongoing "arc" pattern on the higher frame (which is somewhat similar to the broader picture in the S&P 500) in addition to the bull/bear interaction (bullish above/bearish beneath) into the current $200 per share level.

By Corey Rosen bloom, CMT, Trader and Blogger, AfraidtoTrade.com

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