Technology stocks have arguably pushed the US equity market towards new highs. And they might continue to do so in the near future. Three technology stocks are on my radar which have a potential to re-establish their uptrends after a period of consolidation. The breakouts of their patterns will be an important signal.
AMAZON
Everybody is already familiar with Amazon, the backbone of the technology sector. So, I won't be wasting time explaining what the company does... After a few weeks of consolidation, Amazon might be ready to move higher again. Maybe this time a move towards $4000 per share? The stock formed a symmetrical triangle that if broken to the upside can signal a re-establishment of Amazon's previous uptrend.
Approximately 75 percent of symmetrical triangles break out to the upside and combine that with the strength of the technology sector, it should come as no surprise that I'm leaning towards a breakout to the upside for Amazon. A Biden administration could also put a US lockdown in effect which might be a positive for Amazon because of an increase in online shopping. However, if this increase in online shopping will be visible in Amazon's stock remains to be seen.
I do want to add that the volume is not attractive. However, this is certainly not a deal breaker. The volume not confluencing with a pattern has frequently been the case these past few years in the equity markets. Why this has been the case is still a bit of a mystery to me. It has most likely to do with the enormous growth in market participants. Confluencing volume is a welcome sight when initiating a position but it is definitely not a must-have. I will be looking to buy Amazon with a breakout above the upper boundary with an ambitious target of $4000.
ANSYS
Ansys is another technology stock that looks poised for a breakout to the upside. The volume is declining which is a good sign for the validity of the pattern. I have also placed the momentum indicator on the chart. I like this indicator because it gives me the ability to compare the different highs and lows of a stock. The second low is losing momentum quicker than the first which is a fairly decent confluence.
Like the symmetrical triangle, a rectangle is very frequently a continuation pattern. So, I am again leaning towards an upside breakout. A breakout to the downside could happen, but my rules don't support a short trade in Ansys at this moment. I will scratch Ansys from my watchlist on a downside breakout. The measurement rule signals a target of $408 per share if a breakout happens.
Ansys develops software solutions for design analysis and optimization. Ansys' software accelerates product time to market, reduces production costs, improves engineering processes, and optimizes product quality and safety for a variety of manufactured products.
WORKDAY
I like how this last technology stock looks. The stock of Workday has formed a textbook symmetrical triangle and even though symmetrical triangles are less reliable, I still like this one a lot. The reason for this is that the stock arguably broke out of a head & shoulders pattern before consolidating into a symmetrical triangle. The head & shoulders pattern is very loosely defined here and is definitely not how a traditional h&s should look like. However, it still gives the necessary added confidence for a potential trade here if Workday breaks out of the upper boundary of its symmetrical triangle.
Another confluence is the momentum indicator which I added here as well, the indicator already broke out of its coil before the stock broke out. This is not a signal that you should be betting your whole net worth but its an alluring confluence here. A measurement rule objective of $278 has been signaled if an upside breakout occurs.
Workday provides enterprise cloud-based applications. Workday offers human capital, spend, and financial management, as well as payroll, initiatives and higher education solutions. They serve the finance, healthcare, manufacturing, education, and technology industries worldwide.
