As a technician I am constantly looking for patterns that will produce good risk/reward situations and of course there are continuation formations that break both the up and downside. Traditionally certain scenarios will move in predetermined direction but when the breakouts happen in the OPPOSITE direction, the ensuing move can be quite powerful. Below we look at 2 recent examples WETF and MD, both descending triangles, that moved to the UPSIDE and their action since has been quite bullish the last couple weeks. Of the 2 we are more constructive on MD, especially if it can move through its 200 day SMA. WETF is still 51% off its most recent 52 week highs.
In our Friday 4/8 Game Plan we looked at WETF. The stock was flirting with the round 10 number and is up by 23% over the last 2 weeks. On a weekly basis the 10 figure held on a CLOSING basis the week ending 2/12 and dating back to the weeks ending 5/23/14, 8/8-15/14 and again 10/17/14 (perhaps a bear trap was put in the week ending 5/16/14 with a CLOSE of 9.56). So in retrospect a break below that 10 handle probably was small. It broke to the UPSIDE and the corresponding move has been strong.
WETF is a financial play down 35% YTD and 53% over last one year period and sports a dividend yield of 3.1%. Its most recent earnings reaction fell 7.1% on 2/5, but the prior 3 reactions rose by .8, 7.3 and 4.6% on 10/30, 7/31 and 5/1. It REPORTS 4/29 before the open. As markets have flourished WETF is on a current 4 week LOSING streak and this week headed into Friday is off by 8.3% heading into Friday. The stock is off 61% from recent 52 week highs and has formed a bearish descending triangle pattern which has formed in conjunction with the round 10 figure. Look to short with a sell stop of 9.85. On the weekly chart looks like the 5th wave in a correction.