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Trade the Channel Breakout in Madison Square Garden

Trade the Channel Breakout in Madison Square Garden
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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.

Posted-In: Long Ideas Short Ideas Technicals Trading Ideas


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