Expand Energy Corporation Based on Rectangle Pattern
1. Pattern Analysis
- Pattern: Rectangle Pattern
- Timeframe: 2.8 Years
- Description: Expand Energy Corporation has been trading within a well-defined Rectangle pattern, with horizontal resistance at $98 and support at $68. This prolonged consolidation phase represents a balance between buyers and sellers, with neither side dominating. The recent breakout above $98 signifies a potential end to this consolidation and the start of a new bullish trend.
2. Volume Analysis
- During the Rectangle Formation:
- Volume remained relatively low during the consolidation, which is a typical characteristic of Rectangle patterns. The lack of significant volume reflects reduced volatility as the stock traded within the defined range.
- Breakout Confirmation:
- A substantial increase in volume accompanied the breakout above $98, validating the bullish breakout. This surge in volume indicates strong buying interest and confirms the breakout’s reliability.
3. Price Action Analysis
- Resistance Levels:
- $98 served as the upper boundary of the Rectangle pattern. The recent breakout above this level suggests a bullish continuation.
- Support Levels:
- $68 represents the lower boundary and long-term support of the Rectangle pattern.
- Intermediate support at $88, derived from the recent price action, is likely to act as a pullback zone if the price retraces.
- Candlestick Behavior:
- The breakout candle is a strong bullish candlestick with a long body, indicating decisive upward momentum. The absence of significant upper wicks suggests minimal selling pressure at the resistance.
4. Validation of Bullish Signal
- The breakout above $98, accompanied by strong volume, confirms the bullish signal for the Rectangle pattern. This breakout indicates a shift in market dynamics, with buyers gaining control and pushing prices higher.
5. Target Setting
- Target Projection:
- The height of the Rectangle pattern is $98 - $68 = $30.
- Adding this height to the breakout point gives a target of $98 + $30 = $128.
- Incremental Targets:
- Target 1: $110 (+12%) – A short-term target based on psychological resistance.
- Target 2: $120 (+22%) – A medium-term level aligning with intermediate technical levels.
- Target 3: $128 (+30%) – Full pattern projection.
6. Entry and Stop Loss
- Entry Strategy:
- Primary Entry: Above $98 following confirmation of the breakout with sustained volume.
- Alternative Entry: On a pullback near $88 if the price consolidates before resuming its uptrend.
- Stop Loss:
- Place a stop loss at $88 to protect against a failed breakout. If the price falls below this level, it would invalidate the immediate bullish outlook.
7. Trade Setup Summary
- Entry Levels:
- Above $98 on breakout confirmation.
- Near $88 on pullback support.
- Targets:
- Target 1: $110 (+12%).
- Target 2: $120 (+22%).
- Target 3: $128 (+30%).
- Stop Loss: $88.
8. Final Notes
The Rectangle pattern breakout on the weekly chart suggests a strong bullish move is underway. The alignment of technical breakout levels with a volume surge supports the reliability of the setup. Traders should monitor volume and price action closely to confirm the breakout’s sustainability.
This trade setup offers a favorable risk/reward ratio with clear entry, exit, and stop-loss levels, making it suitable for medium- to long-term trading strategies.
