This article is going to describe and show the power of pure technical analysis, as it applies to trading. I don’t know what this company does or how it makes money, but I know I can trade it based on the technicals. A student of mine actually requested this stock and I told him I would do an analysis just for him! Now, the good news: the stock has volume over 1,000,000 on average and it trends nicely, so the analysis is easy to do.
THE STOCK
Charter Communications (CHTR) has been in a solid distribution phase since June/July of 2013. The November 22 and January 27 candles both look very bullish to me. It appears this stock is being propped up from the bottom with a nice angle as well. Therefore, it is making higher lows and relative highs.
CHTR has been on a monumental tear since its inception. I mean, in 2010 it was trading around $30. I’m not a math major, but that’s over a 400% increase in five years. That’s solid! This distribution phase could also be considered a large wave 4, using Elliot wave theory. I would therefore be considering 7/2011 – 7/2013 as a wave 3 extension.
EARNINGS
According to earningswhispers.com, earnings on CHTR come out on 2/21/2014 before the opening bell. Keep that in mind, because with current price action, the stock could begin to move higher before earnings. I personally would be much happier if the stock and its price action remained stagnant until earnings.
At this point, if CHTR closes above 141.37 (before earnings) I would buy some insurance in the form of a protective put, over earnings, in case of a strong gap down. If earnings are released and then the stock closes above 141.37, the most likely scenario would be a bullish entry. One could add to their position with a close above 144.73. First target (using the first wave in this ascending triangle) is $160.00. The stop would simply be placed below the current pennant, around $135. That’s quite the risk: reward ratio if you ask me. CHTR is being held up nicely by the 100 simple moving average and all indicators have rested, giving plenty of momentum in this bullish run, especially if this stock pops nicely from earnings.
This could be fun so remember as always, plan your trade and trade your plan!
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