This is how PAG stock went from $79 to $109 in 2.5 months. It made a cup with handle pattern and also an ascending triangle pattern. We will also learn about the Japanese Candlestick pattern of the bottoming tail. You will also learn about the break of downtrend line.
Let us begin with the weekly chart. Sometimes it is a good idea to start with the weekly chart as it can allow you to spot some things that other people do not see.
First of all the weekly chart of Penske Automotive told us that the stock was quite oversold in the weekly chart. The stochastics became oversold and gave us a buy signal. As the stock became oversold, a weekly Bottoming Tail also appeared.
The weekly bottoming tail is a bullish reversal pattern and when you see the bottoming tail being present in an oversold situation, it can be a very powerful signal that the stock is about to go back up.
As you can see, the stock broke above the highs of the bottoming tail and from there it shot up. However, it will take an investor some patience. The stock traded sideways for many many weeks.
But the sideways trading eventually set up a chart pattern called the cup with handle pattern. The correction and also the sideways trading made a cup like pattern in the chart of PAG. The stock broke out of a handle and then it shot up.
Let us now zoom into the daily chart of PAG. Let us examine the technicals. First of all the stock was above the rising 200 MA. The 200 MA is the yellow line on the chart.
When a stock is above its rising 200 MA it means it is in a long term uptrend. Therefore any correction could be an opportunity to buy the stock. The first sign of a change in trend is when the stock broke above a downtrend line.
That happened in early July 2021. The second sign of a trend change is when the stock went above the 20 MA. The red line is the 20 MA. PAG then made higher lows (HL) and it had a bullish cross. A bullish cross is where the 20 MA crosses back above the 50 MA.
As the stock nears the previous top in May, the stock stalled and traded sideways. But this sideways trading resulted in the formation of an ascending triangle.
An ascending triangle is a continuation pattern and when the stock broke out above the ascending triangle, the stock shot up higher quite rapidly. Trends are very important and this stock is in a very strong bullish uptrend.
You know that a stock is in a nice uptrend when it is above its rising 20 MA, 50 MA and 200 MA. The stock is still trading above all 3 moving averages right now. Therefore there is a high probability that this stock will continue to rise.
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