Republic Services, Inc. (RSG), a U.S.-based waste collector, is setting up for a nice breakout in the coming weeks. The stock has been consolidating into a triangle pattern over the past five months. A breakout is becoming more imminent each day.
We can look at the chart to get an idea on what direction we can expect the breakout to occur. The pattern the stock is stuck in is known as a symmetrical triangle. Take a look:
The declining resistance level, in red, and rising support, in green, have formed a symmetrical triangle shape. This is where the pattern gets its name. Triangle patterns are my favorite to trade because they give us so much information.
Not only do we know the key levels to watch, the red and green lines on the chart, but we also how big the breakout will be. We simply take the height of the pattern, which is $6 in this case, and add it to a breakout point. That's roughly a 7% move we can expect to see in a few weeks.
But a triangle patterns also tell us which way to expect the breakout – they are typically continuation patterns. That means, whatever direction the stock was trending in prior to the triangle pattern, the breakout typically continues along that trend. In this case, Republic Services stock is clearly trending higher. That tells us to expect an upward breakout, which prices in a 7% rally from the stock's current price.
The Bottom Line
Republic Services share prices have consolidated over the past five months. This consolidation formed what is known as a symmetrical triangle pattern, giving us plenty of information about what to expect. The base case is for the stock to break out to the upside and jump 7% in quick fashion.