This flag pattern is exactly what to look for in hot stocks about to run up.
Plus, this stock has its earnings announcement in two weeks, so it has potential to run up into that news event.
DexCom Inc. (DXCM) develops a glucose monitoring system for people with diabetes.
As you can see by the chart below it’s near its all-time high, and it has a nice flag retracement pattern.
Even better, it has a massive consolidation range from roughly $150 to $120. A breakout above this range would be very bullish.
Finally, it will announce earnings on February 21, which could be the catalyst that pushes it out of its range.
However, I’m not a big fan of holding trades that I don’t have profits in during earning announcements, so patterns like the one in DXCM present opportunities to enter a trade with the potential to have a profit before the earnings news.
The setup here is very straightforward.
The low of the pullback (flag) at $136.78 provides the best stop loss point because it’s the low of the move. However, the $140 is the important support level that it is now rallying off of so a stop under $140 should work well also.
If it trades over $146.50, its upward momentum should continue, so that is the trades entry point.
Once it reaches $150 it should not trade back under $145, so I’d move my stop up in that case in an effort to limit my risk quickly.
The idea behind this trade is to enter before the breakout over $153, and before the earnings report.
Of course, there isn’t any way to be sure that it will breakout before or even after the earnings report. This setup is simply a way to attempt to be in the right place at the right time with a prudent level of risk.
Rick Nartarian, Chief Investment Officer
The American Investor Daily