Submitted by admin on Sun, 12/13/2009 - 14:05
Posted in
J Crew Group (JCG) has formed a rectangular top. This formation is also know as a channel. A breakout to the upside occurred on Friday. This stock has been on an uptrend since April. To calculate a minimum target price, read on.
Subtract the lower horizontal trendline from the top horizontal trendline. In the case of JCG this would be about $4. Add this to the top trendline. (i.e. about $48/share for JCG). This is the minimum price target.
For a maximum price target, measure the length of the formation and add to the top horizontal trendline. You kind of have to eye-ball it. I'm guessing this would be about $12. The maximum price target would be about $56/share.
Now, you can't just blindly apply these targets. Look at a multi-year chart and find the resistance points. There's one at about $50/share so that might slow the stock.
Throwbacks are common in this formation. So, if you miss the breakout. The stock should return to the breakout point about 50 percent of the time before heading up again.