Stocks

Three Line Price Break stock picks: DLB, ACGL

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Dolby Laboratories stock had already formed a three line price break prior to Tuesday’s trading session at the US stock market. As the DLB share price overcame the previous high, an entry for a long entry was recommended according to the trading system we discussed yesterday. The new high printed in the first 5 minutes of trading meant that traders should have bought DLB for $30.60 a share and placing a stop loss at $29.45, Friday’s low. Following the system’s rules, the profit target is placed at $32.70, 2 times the length of Friday’s candle (about one dollar). Hopefully my tweet reached out some traders before DLB shares gained 3% by Tuesday’s closing bell.

dolby-dlb-stock-box-chart

While most investors and traders will be anticipating the earnings report by Apple after the close of regular stock market hours, I would be watching Arch Capital Group stock. ACGL shares printed a new all-time high on Tuesday at $45.68 completing a breakout above the resistance level of an ascending triangle that was confirmed three times since October! This is by far one of the most promising bullish patterns I have come across the past months!

acgl-stock-breakout

How to trade ACGL stock

First of all, despite the strong evidence of the uptrend, I still need confirmation before investing in ACGL. This confirmation will likely come if shares trade higher than $45.70 on Wednesday. Assuming that happens, Three Line Price Break suggests a long entry and a tight stop loss right below Tuesday’s candle at $44.65. I guess placing a stop loss below the recent retracement to $44.50 is also recommended.

Regarding profit targets, traders have two options:

  • Set a profit target at twice the length of the breakout candle (one dollar), at $47.70.
  • Calculate the triangle’s height ($3.20) and set a profit target by adding that height to the entry point ($48.90).

Obviously risk-averse traders will go for the first option. Another likely choice is to sell half of the shares at $47.70, close 25% of the position at $48.90 and let the remaining shares catch an even bigger swing, by using a loose trailing stop order.

Disclaimer: I am long DLB and also plan to initiate a long entry at ACGL within the next 48 hours.

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Jim began with card counting at blackjack tables, then moved to sports trading at betting exchanges, played online poker and ended up investing in US stock markets and forex. Nowadays he mostly writes than gamble or invest. Connect with Jim: StockTwits | TradingView