Stocks of the day: British American Tobacco

We start this week with the analysis of the British American Tobacco (BAT). The last time we wrote about it was the October 12, when the price was breaking the lower line of the symmetric triangle and back then we were bearish.

We’re mostly correct in our views about the stocks, this time we missed out. A quick look on the chart shows us that the lower line of the triangle was pretty much ignored and instead of the decisive downswing, the price went sideways. The price is currently locked inside of the rectangle (yellow) between the resistance on the 26.2 level (orange) and the support on the 25.1 level (grey).

Some traders may say that it’s a rectangle but at the same time an inverse head and shoulders pattern and honestly, they’re all correct. The way to trade it now is pretty straightforward from a technical point of view. Traders respecting price action rules will buy when the price breaks the orange resistance and sell when the price breaks the grey support.