Stock Of The Day: Generac Breaks Out (Again)

Trading in Generac Holdings Inc. GNRC is quiet on Tuesday. The stock is consolidating after a move higher of almost 5% yesterday. Some analysts attribute the strength to possible increased sales of generators because of the heatwave in the Midwest.

Generac is the Stock of the Day, with a price action that appears to be bullish and a good chance it will move higher.

Technical analysis has a dubious reputation, but unfortunately, it deserves it. Many analysts look for patterns on charts without understanding the price action that makes these patterns form.

For example, an ascending triangle pattern is bullish. It is a graphical illustration of a market with aggressive buyers and complacent or patient sellers. This dynamic can be a setup for a move higher.

In early April, the stock found resistance around the $117 level, where it stayed until early May. The traders and investors who created this resistance with their sell orders were content to stay there.

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They decided that if the buyers came to them, they would sell, but if not, they would hold onto their positions.

During the same period, those who wanted to buy became increasingly aggressive. They were increasingly willing to pay higher prices.

Stocks don't go in straight lines. They go in peaks and valleys.

When a valley forms at a higher price level than the previous valley, traders say it is a higher low. This is bullish because the buyers are entering the market at successively higher prices.

After breaking out of this ascending triangle, another one appeared on the chart in late May and June.

Resistance formed around $131. The sellers were content to stay there. But the buyers continued to come into the market at higher prices. This formed the second ascending triangle on the chart.

Now the shares have broken out again and are trending upwards.

The ascending triangle pattern is bullish. It is an illustration of aggressive buyers and complacent sellers. These dynamics set the stage for a move higher.

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