Stock of the day: Porsche

Today we continue our trip around top carmakers and take a u-turn back to the German car company, Porsche. We already discussed this asset on September 15th, and back on that day, we were waiting for a proper breakout to show us the direction for the forthcoming weeks. We said:

“And that brings us to the following summary: A breakout of the upper red line will bring us a buy signal and a breakout of the lower yellow line will bring us a sell signal.”

As you may expect, we’re coming back to Porche because we eventually got the breakout but it wasn’t as smooth as you may expect. So what happened here is that we got a bearish breakout of the horizontal support.

Unfortunately for sellers, the drop was not continued and the price quickly came back above the resistance. That’s a perfect example of a false breakout. We love false breakouts because they’re rather reliable trading patterns.

After a false breakout, you usually can experience a strong movement in the opposite direction and that’s what’s happening now. The price is climbing up and today it’s breaking the red down trendline, which we had mentioned in the previous analysis.

This upswing and the false breakout from before are giving us a legitimate buy signal.