Trade the Channel Breakout in Madison Square Garden
Madison Square Garden (NYSE: MSG) has been on a solid up-trend since its debut in 2010.
For the past three months, the stock has been stuck in a price channel between $55 and $58 despite market strength. On the weekly chart we see that prices have been in heavily overbought conditions based on the RSI, and the MACD has formed a bearish crossover from its large run-up.
This could be seen as consolidation, but one should let market prices dictate the next move whether that be up or down. A breakdown under $55 could bring a pull-back in prices down to the 50 EMA at $46.25 slightly above past resistance at $45 and still be in an up-trend. A breakout above $58 would be a sign the consolidation is over and prices are set to make new highs.
What to do? Based on the daily chart below, a trader can profit from a movement in price in two ways:
1. Prices close below $55 signaling a breakdown, which is also in confluence with a breakdown below the 50 EMA support currently at $55.21. Traders can SELL SHORT with a buy stop just above the top of the channel at $58 with a target price of $46 just above the 200 SMA support.
2. Prices close above $58 signaling a breakout of recent consolidation and a continuation of the up-trend. Traders can BUY on a close above $58 with a stop loss just below the bottom of the channel at $55. A trailing stop-loss could then be utilized since no resistance exists above the $58 all-time highs.
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