I'm looking at a couple of stocks I like due to symmetry -- that is, similarity or equality when comparing swings in the same direction.
The first name is Costco (COST), in which I'm seeing a timing-symmetry pattern for the past couple of months that suggests a buy entry. This is a basic setup: The previous three share declines have each lasted seven trading days before giving way to an upside reversal, and the most recent pullback -- into the Jan. 14 low -- has also lasted for seven sessions.
The basic price pattern since the Jan. 14 low is considered bullish, as well, as it is currently showing a higher high and higher low. The Jan. 14 low came on top of key price support at the $99-to-$77 area. I'll continue to like Costco on the buy side as long as the price continues to hold above this key support zone -- and, ideally, above the most recent low.
The initial upside target comes in at $103.92, and target 2 is $105.07. Beyond this, the higher-degree target comes in at the $108.54 area. If, instead, the price breaks $99, I will back off the buy side until further notice. Stops can be placed just below this zone.
IBM (IBM) is another setup I'd like to explore, as it's showing some beautiful price symmetry at the $189.80-to-$190.45 area. Within these symmetry projections I also see a 0.786 Fibonacci retracement level from a prior high, as well as a 1.272 price extension of a prior swing.
This identifies a relatively tight price cluster support zone -- one that has held so far. As long as the price continues holding above this key zone, the initial upside target will remain in the $197.97 area, though a bigger-picture view shows even higher potential, at around $219. At this point, the maximum risk on any long positions should be defined as below the $188.84 swing low.
