NYSE Euronext (NYX)

[jjcrunch]

NYSE Group Setting Up to Run

By Jack Steiman
1/16/2007 8:00 AM EST

NYSE Group BULLISH
Price: $105.31 | 52-Week Range: $48.62-$102

A change of character began to take shape in August when the stock began to move higher.
The double-top high from November and January has set up a beautiful continuation triangle.
When the move is made out of the trend line in the future, there is the possibility of as many as 23 points to the up side.

Position: No position.


NYSE Group (NYX) is setting up here to potentially make a big move to the upside in the days and weeks ahead. Let's take a journey and see how this stock has evolved over the past several months to set up this possible move.

When stocks are basing or consolidating, one thing that frequently occurs is that the volume will remain average to below average for an extended period of time. Notice on the chart below how from June through most of August, once the stock bottomed out, the volume became very light almost without exception.

A change of character began to take shape in late August when the stock began to move higher. Notice how suddenly the volume trends begin to pick up as the stock ascends. It's good to look for this behavior in any stock you are watching. When an extended period of consolidation is over, the volume will accelerate regardless of whether it is a breakout or breakdown. As the stock moved higher and higher, the volume continued to march higher with it, especially from the November period until the double top in early January.

The double-top high from November and January has set up a beautiful continuation triangle. This means that the stock is getting a chance to consolidate for what would normally be a continuation pattern from the previous strong move, which in this case was to the upside. There is no way of predicting the length of any consolidation move, but the key is to make sure that the stock stays within the parameters of the lateral consolidation between the trend lines, which are approximately 110 and 93.

There are two ways to buy this type of play. You can wait for a move above the top of the trend line, or you can hope for some weakness and buy as close to the bottom of the trend line as possible.

Let's see how far up this measures should the breakout occur in the future. The first high in November was at 112, while the lowest reading within the trend lines is approximately 89, or 23 points. When the move is made out of the trend line in the future, there is the possibility of as many as 23 points to the up side, but I always say never get greedy, and please take some profits along the way.

Go slow and remember to buy either the breakout or somewhere toward the lower trend line but to keep this one on your screen, as some wonderful gains look possible in the near future once it makes the break above the upper trend line.

Jack Steiman
Jack Steiman is president of TheInformedTrader.com, for which he also conducts live seminars, and Steiman New Research Group, LLC. He has also conducted live seminars in his role as chief financial strategist for InvestEd Central, hosted "Market Close Live with Jack Steiman" and "InvestEd Central with Jack Steiman" on Business Talk National Radio, and has appeared on "Your World with Neil Cavuto."