Thermo Fisher Scientific (TMO) broke out on the upside from an 11-month consolidation pattern last month. Is it too late to buy or too extended to chase after climbing from around $153 to over $170 in just a couple of weeks? Buying before a breakout or just at the breakout is preferred as the risk tends to be less and the reward the greatest.
Buying after a breakout can be tricky if prices are extended and could correct before renewed gains. Let's visit with the charts and indicators to determine the best way to approach the long side of TMO.
In this daily chart of TMO, above, we can see the long sideways consolidation pattern. Prices largely stayed in a $20 range between $140 on the downside and $160 or so on the upside. The pattern started to become more positive in March and April as prices only dipped to around $152 instead of returning to the bottom of the trading range. There is a bullish golden cross of the 50-day and 200-day moving averages in early March. The On-Balance-Volume (OBV) line is bullish by rising with the price action and recently moving up to set a new high and, we hope, signaling new price highs. The Moving Average Convergence Divergence (MACD) oscillator is a trend-following tool and it is in a bullish mode above the zero line.
In this weekly line chart of TMO, above, we can see the sideways consolidation pattern and the subsequent breakout. Prices are above the rising 40-week moving average line. The weekly OBV line looks like it has made a double bottom in January and April and should it continue to rise it will confirm and support the price rally.
This Point and Figure chart of TMO, above, shows the consolidation pattern noted above in a different light. The breakout at $162 is clear and is called a triple top breakout. The sideways consolidation when measured across and projected to the upside yields a potential price target around $201.
Bottom line: TMO may or may not pull back. Assuming we can dip into the $170-$165 area, traders should go long on that pullback if available. If there is no pullback to buy, then traders should go long on a close above $173 and then risk a close below $165. The $200 area is our upside price target.