Not every bullish chart I look to trade is just breaking out. Cintas (CTAS) appears strong here as a possible trade. During October, the stock has been running higher in a bullish channel and Thursday's close put Cintas near the top of the channel. While it's pulled back a little now, the opportunity for a bullish trade may be better today or tomorrow depending on the action.
Folks may be a bit skittish today thanks to 1987, but it isn't something I would let impact you beyond a little nostalgia or the chance to hear some stories from veteran traders. What I'm watching for on Cintas is a pullback that doesn't break under $92, especially on a closing basis. I would then be looking to buy the next day's open as long as it remains above $92, which looks very possible to happen today.
A trade such as this does require a very tight stop. Trading a channel for me means if the stock loses the channel support, then I don't want to be involved going forward. The force index is strong, but I do have some concerns if bulls can't get the relative strength index (RSI) or ultimate index through the 70 area. If price does rebound, but neither of those indicators get through 70, I'm likely to cut the trade quickly or just maintain a tight trailing stop. It's a trade that will require some close supervision.
On the weekly chart, Cintas had a price pattern that looked bearish until last week. The megaphone pattern, higher highs with lower lows, is generally very bearish, but the stock closed above resistance on Friday. Using a $90 stop, Cintas looks like a buy, based on a longer-term view, if you want to avoid the tick by tick watching of the daily chart.
The RSI is very strong, holding above 50 as far back as the eye takes us. We had a bullish cross in the slow stochastics in the last six weeks and just recently on the moving average convergence divergence (MACD).
Trend and momentum is strongly in favor of the bulls and when you combine that with the very strong bullish volume action on the daily chart, this is one strong weekly chart that could be seeing $100 before the end of the first quarter, with a possibility of a few dollars more.
A weekly close under $90 would shake me out as I would expect a retest of $82.50 or even $80 and I have no desire to stick around and watch that happen.