Is PLUG Setting Up Another Breakout Run to the Highs

Jul 29, 2014: 10:21 AM CST

Former high-flyer Plug Power (PLUG) could be setting up another bullish breakout and run for the prior highs.

Then again, it could be luring buyers into the stock like a seductive siren’s call.

Let’s take a look at the chart and decide which levels are key for trading a potential bullish breakout and avoiding a Bull Trap.

PLUG shares took two spike-bullish rallies (December 2013 and January 2014) along with two “bull flag” retracements ahead of the early 2014 famous double-in-price from $5.00 straight up above $10.00 per share.

After the parabolic rise (see today’s earlier post on Intel’s INTC Parabolic Arc), a climax occurred for a violent V-Spike trend reversal lower as shares collapsed from the $11.00 per share high.

Shares consolidated and stabalized into the $4.00 per share horizontal support level and built a base from which buyers could rally (bid) the stock higher to continue the uptrend at a more normal upward pace.

That’s what we’ll be watching in the weeks ahead for PLUG shares:

To what extent can buyers bid shares higher to continue the uptrend without overheating the stock and seeing a repeat pattern of the parabolic arc then collapse?

For now, keep a close watch on the current spike high from July 22nd above the $6.00 per share level.

A further breakout and buy-signal (short-squeeze trigger) could help propel share prices through the “Open Air” pocket (no obvious resistance targets) toward the prior $8.00 per share target or even the $9.00 level.

Further upward action through this resistance cluster (price target) suggests that buyers could successfully bid shares on a more normal pathway back to the $10.00 level.

Otherwise, guard yourself against a Bull Trap and be very cautious should share prices revert back under the $5.00 (daily EMA confluence) level.

To sum up the chart, here’s a pure-price view of the rally, climax, and current retracement phases:

Notice the stable yet subtle rise throughout 2013 (under $1.00 per share) and the accelerated price growth (rally/trend) that developed at the end of 2013 into early 2014.

Pay attention to the unstable, exponential growth (rally) from $4.00 to $11.00 and the subsequent collapse (liquidation/panic selling) from $11.00 all the way down to $4.00 per share.

Also note the slightly rising horizontal support trendline as drawn into the $4.00 level.

Caution is key for this stock, but we all could use a little more volatility in this market and PLUG may deliver it.

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Corey Rosenbloom, CMT
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