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Extended trends often start with big bangs and major breakouts. Chartists can identify “big bang” moves by showing price change in ATR terms. We can use the price charts to identify big breakouts. Today’s example will show Paypal (PYPL), which is part the FinTech ETF (FINX). The ChartTrader weekly report featured FINX because it broke its July high and Paypal because it is part of this strong group. Note that we are offering a free look at this week’s ChartTrader report and video (here)
Let’s first look at the breakout on the price chart. PYPL was trading above 300 in 2021 and then fell to around 50 in October 2024. The stock rebounded with the market from November to January and then traded flat the last seven months. A large range formed with the stock hitting resistance at 68 at least four times since January. The stock broke through with a big move in August and this is very bullish.
Not only did PYPL break a major resistance level, but it did so with a big bang. The indicator window shows Normalized ROC, which measures the price move in ATR terms. Average True Range (ATR) is a volatility indicator developed by Welles Wilder. Normalized ROC (20,250) shows the 20 day price change divided by ATR(250). This indicator exceeded 5 in late August, which means the price move was more than 5 ATR values. A big bang indeed. This is the strongest 20-day move since 2021. Normalized ROC is part of the TIP Indicator Edge plugin for StockCharts ACP.
Even though the big bang move and a breakout are long-term bullish, note that Paypal is short-term overbought after this sharp advance. This means we could see some backing and filling as the stock digest the advance. The green shading marks an area to watch for possible support should we see a pullback.
Note that we are offering a free look at this week’s ChartTrader report and video (here)
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