Johannesburg - Information technology stock Pinnacle has been an outstanding performer in recent years. It is forming two interesting chart patterns, that, if confirmed, will point to further upside to come. This is shown on its chart.
Pinnacle: Further upside potential.
Trend: Short and medium term sideways. Long term up.
Strategy: Buy a close above line 1.
- Pinnacle has been moving sideways since May and has formed a large “potential” head and shoulders (labelled in blue). But there is a good chance this will be a head and shoulders continuation pattern, which is bullish.
- In addition, in more recent months, it has been forming a “potential” inverse head and shoulders (labelled in red). This pattern may well create the impetus for an upside breakout above line 1.
- Buy on a daily close above line 1, that is, above R24.72.
- Target 1 (T1) for a break-out is R29.40 based on the height of the inverse head and shoulders projected up. Target 2 (T2) is at R30.90.
- Once it closes above line 1, the stop-loss will be a daily close below R23. Short- or medium-term players take at least half profits at T1 (R29.45).
Colin Abrams is an independent technical analyst. To subscribe to more recommendations by the author, or attend his courses, please go to www.themarket.co.za.