After a hitting a 52-week high of $51.98 on September 14, CHL price action pulled backed slightly and began to trade sideways within a channel ranging from $46.30 on the low end to $50 on the high end. Within the channel, the 150-day moving average acted as support until recently, providing traders a channel with a channel.
Price has now turned around from the bottom of the outer channel and is bumping up against the 150-day moving average in anticipation of a potential move back toward the upper half of the channel.
The channel sits right in the middle of the Fibonacci upward wave, which is suggesting a breakout above the price channel. The fuel gauge (blue dotted line above; click to enlarge) is confirming a move higher and price has closed above the T3 Tilson for the second day.
A few possible scenarios:
- CHL can easily continue for some time within the price channel allowing traders to buy at the bottom and sell at the top.
- Price will resume the previous direction -- which in this case is higher -- and traders can consider placing a buy stop order above the upper range of the channel to capture a price move towards the Fibonacci channel target of $56.30 at the -1.618% extension.
- Bearish traders can consider using the same scenario as above -- simply revise the trade at the bottom of the trading range.
Summary : CHL continues to remain in the a channel providing channel traders a possible set up. More directional traders can place stop entry orders on either side of the channel looking for the break out.