Submitted by admin on Sun, 11/29/2009 - 06:58
Posted in
J Crew Group (JCG) has formed a rectangular top. This formation is also know as a channel. A breakout can occur in either direction. This stock has been on an uptrend so the bias is up. But it's probably best to wait for the breakout to be safe. 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. For a upside breakout, add this to the top trendline (i.e. about $48/share for JCG). For a downside breakout, add this to the bottom trendline (i.e. about $36/share for JCG). These are the minimum price targets.
For a maximum price target, measure the length of the formation and apply the same logic above depending on which way the stock breaks out. You kind of have to eye-ball it. Also, we don't really know the length at this point since the stock hasn't broken out yet.