This article is educational. We analyze one great case which highlights the importance of chart analysis. In particular it is a triangle breakout, a textbook pattern in chart analysis, which is very high reward/low risk setup for investors. Case in point: Kush Bottles, symbol KSHB.
Note: InvestingHaven's research team noticed this setup back in October when the stock was trading below $2 while it touched $7 this week, see this article Cannabis Stock Kush Bottles, Packaging Producer, On The Verge Of A Big Breakout.
Kush Bottles is specialized in manufacturing packaging for the cannabis industry. Whether there is a moral aspect to investing in the cannabis industry is not relevant in today's discussion.
The point is that Kush Bottles had an amazing setup on its chart: a triangle pattern. That pattern was in the making for almost 2 years which is an amazingly important fact. The longer it takes to create a pattern the stronger the move once it breaks out or breaks down.
This is what we wrote back in October:
Moreover, the chart looks awesome. Kush Bottles is trading at a big breakout level, and is doing so on rising volume. In addition, it has been consolidating since early this year, a 9 month period, in which it respected support at $1.80.
If Kush Bottles goes slightly here from here, and trades above $2.20 for at least two consecutive weeks, it will be a breakout which could double the price of this stock.
The way to interpret a triangle pattern is highlighted in the above quote. Sellers were not able to push this stock below a certain price point, in this case $1.60, for more than a year. However, buyers were not able to push this stock above falling resistance neither. That is exactly what the triangle pattern stands for, and how buyers/sellers collectively create this pattern.
Once the price of a stock reaches to the apex of the triangle it is ‘forced' to choose a direction: Either up or down. That is when a breakout (up) or a breakdown takes place.
