MGM gave us a BUY SIGNAL when broke its down trend on Friday March 5th by moving above $11.15 and its 50 day MA. The upper Bollinger Band has since started trending higher. MGM has now been trading up in a narrow channel for the past 2-3 weeks. However, MGM's Stochastic is in overbought territory at 90.47. This could indicate that we may soon have a little pullback, but if this happens it shouldn't go back lower than its 50 day MA. Obviously if it were to break back down the 50 day MA this would trigger a SELL SIGNAL. Right now MGM looks bullish as it broke its major down trend which had been intact for the past 2-3 months. MGM could move higher in the upcoming days but the real challenge will be going through the very strong resistance levels of around $12.75-$13.00. MGM hasn't managed to move back above $13.00 in the past 3-4 occasions since it fell below it in November 2008. The day MGM manages to move sharply above $13.00 is when we will have a STRONG BUY SIGNAL.
By looking at the weekly chart we can see that MGM has been trading in a major sideways trend since May of 2009. However, what is the most interesting it that this sideways trend has been narrowing more and more, and MGM now looks to have formed a ascending triangle pattern which started in March 2009. I believe that we are now getting closer and closer to a break, most likely above $13.00 which would confirm this ascending triangle pattern. According to investopedia.com: "An ascending triangle is generally considered to be a continuation pattern, meaning that it is usually found amid a period of consolidation within an uptrend. Once the breakout occurs, buyers will aggressively send the price of the asset higher, usually on high volume. The most common price target is generally set to be equal to the entry price plus the vertical height of the triangle." With that in mind, to calculate the price target in the event of a breakout, we can see that MGM started this pattern around the $4.00 price level and therefore this would give us a price target of around $22.00 ($13.00-$4.00= +$9.00; $13.00+$9.00= $22.00). The $22.00 level coincides with the closest and most significant resistance level after $13.00. MGM's weekly stochastic has also given us a BUY SIGNAL. Overall MGM looks bullish and appears like it could break $13.00 in the upcoming weeks. Based on the daily chart we could see a little pullback this week, but as long as MGM stays above its daily 50 day MA this would give the chance for MGM to eventually move back above $13.00. Obviously, some patterns fail and if MGM were to break below this up trending support line and move below $10.00, this could trigger a sell off which could send MGM much lower. However, until that happens MGM's chart will remain bullish. The current pattern looks very promising, and historically ascending triangles more often break up than down. For traders looking to get into MGM based on the ascending triangle pattern alone, it is usually preferable to wait and see for a break up above $13.00 before getting in, as there is obviously always a risk of seeing this pattern fail.
LONG MGM
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