Tickers in this Article: ESV
Bullish traders will likely be adding the chart of Ensco International Inc. (NYSE:ESV) to their watch lists because it is in the process of testing an influential level of support. As you can see from the chart below, the ascending trendline has been able to prop up the price in the past and many traders are now wondering if this story will continue. We've chosen to attach the stochastic oscillator to the bottom of the chart because it triggered a buy sign today, which could be used to confirm the strength of the nearby support. The most interesting aspect of this chart is how the crossover between the indicator and the trigger line has accurately predicted a strategic entry position in the past; most notably when the value of the indicator moved above the 20 level (shown by the blue vertical lines). Traders will use today's crossover to suggest that the stock is a candidate for a move higher and they will likely protect their positions by setting stop-losses below the nearby trendline because it offers a favorable risk/reward ratio. A close below the support will put an end to the profitable trading pattern and would suggest that the bears have successfully taken control of the stock's direction.
For more, see Track Stock Prices With Trendlines