Let’s take a quick look at the Weekly and Daily Chart to highlight the key levels to watch, potential targets, and try to answer the question “Is this THE breakout?”
First, I’m showing a longer-term weekly chart of the coal ETF symbol KOL.
We can see a persistent and relentless DOWNTREND beginning in 2011 at the $50.00 per share high and potentially ending with a larger Double Bottom price pattern at the $17.00 per share level (2013 and early 2014).
Aggressive traders enjoy calling market bottoms while more conservative traders need a little more ‘proof’ or evidence of a potential reversal.
Notice what’s happening now – a breakout above the falling 50 week EMA which is something that has not happened throughout the entire downtrend.
I zoomed-in the perspective to highlight the breakout – it’s the image at the top right of the chart (above $19.50).
Here’s a closer look at the Daily Chart of KOL:
We do see the Double Bottom pattern with positive divergences at the start of 2014 which developed at least an initial bullish swing up toward $19.00 per share.
A sideways rectangle developed through the next few months and buyers pushed price higher above $19.00 in August, triggering the current breakout.
Note that Volume and Momentum also confirmed the breakout (they spiked higher along with price).
Should KOL continue the breakout, the next key target beyond $20.00 per share is the prior swing high near $20.50 per share.
Price could move quickly through the “Open Air” (no known resistance) and would be in the bullish green zone beyond $19.50.
Otherwise, a Bear Trap and reversal play would develop on a failure and return back under $19.00 per share.
Keep these levels in mind as we study the chart for additional bullish clues from price.
This article is brought to you courtesy of Corey Rosenbloom from Afraid to Trade.