Stock of the day: British American Tobacco

In today’s analysis, we are coming back to our old friend – British American Tobacco (BAT), which we’ve already analyzed few times. The last time was at the beginning of the December and we showed you a rectangle, hinting two ways it could be traded:

“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.”

As you can see on the current chart, buyers won that battle and the price escaped from the rectangle to the upside. That win was decisive in the mid-term and gave us a clear buy signal. This buy signal introduced a bullish momentum, which allowed the price to break two important dynamic resistances. Both of them being upper lines of the symmetric triangle pattern (different duration).

With the price escaping from the triangle to the upside, we do have a clear buy signal here. The positive sentiment will be cancelled when the price comes back to the triangle but chances for that are now limited.