As you might know, one of my favorite patterns is the consolidation breakout pattern.
My members will know that I love to identify opportunities that consist of this pattern, especially on multiple time frames.
When a stock has a consolidation breakout pattern on the intraday chart, along with the higher time frame chart, my eyes light up because the chart has aligned.
I like to refer to this as the rubber band effect. As the consolidation grows tighter, one might expect the breakout to be more fierce and have impressive momentum.
This was the case on Friday last week when I identified a higher high and consolidation breakout pattern across multiple time frames in IQST.
IQST, according to Yahoo, through its subsidiary, Etelix.com USA, LLC, provides telecom and technology solutions. The company provides international long-distance voice services for telecommunications operators and submarine fiber-optic network capacity for the internet.
IQST’s current market cap, per Yahoo, is 60.91M.
When I was analyzing the chart on Friday, a couple of things stood out to me.
Firstly, I liked how the stock had made a higher low on the higher time frame.
The stock appeared to have bottomed in the middle of August at $0.37. Then the stock briefly attempted to break down earlier this month and made a low of $0.39. Later that day, the stock snapped back and closed green, signaling a reversal and confirming a higher low.
The stock then broke out on Friday, which confirmed the consolidation breakout pattern on the daily chart.
Along with the breakout, volume increased significantly over the previous day, which signaled that the stock might experience momentum and continuation.
With the breakout confirmed on Friday, I was looking for an entry opportunity.
As a profit target area, I had $0.65 – $0.70 in mind.
I entered the trade on Friday at $0.57 after the stock broke out of the intraday consolidation pattern. Also, notice how the volume increased into the close on Friday, after the stock broke out of the consolidation.
I held over the weekend, targeting $0.65 – $0.70. I was specifically targeting that area as the stock attempted to hold above this area multiple times in September and failed.
Therefore, I planned to sell my long position as the stock approached this area, as the sellers might step back in.
Yesterday morning the stock released news. IQST reported improved probability and increased revenue for Q3.
As a result of the news release, the stock traded higher off the open and reached my target areas.
I sold at $0.64 and $0.70 in the morning yesterday.
The Bottom Line
This trade is an excellent example of multiple chart patterns aligning, along with an increase in volume. I noticed the consolidation breakout pattern, the higher low, and critical resistance. Understanding and identifying all chart patterns allowed me to execute my trade plan and manage the trade.