Image Source: DepositPhotosBrinker International (EAT) is showing signs of a classic technical setup that could lead to a strong breakout. The stock has had a strong rally followed by a period of choppy movement. What’s particularly noteworthy is the contraction of volatility—an important signal that often precedes significant price moves.In the first phase of the chart, volatility and volume were higher, but recently both have been decreasing. This contraction signals a potential springboard for a future rally, as lower volatility typically means that the supply of shares is drying up. Yesterday, the stock showed a breakout of a short-term downtrend line, which could have triggered an entry point for some traders.If you missed that initial breakout, there may still be an opportunity. Waiting for a commitment above yesterday’s high could offer another chance to enter the trade. A logical stop-loss placement would be around $67.50, providing some downside protection.Watch the video below for a detailed discussion of EAT stock’s volatility contraction pattern (VCP) trading plan:
Looking ahead, we may see a test of Brinker’s 2021 high, making this an exciting setup to watch for traders who enjoy volatility contraction patterns and Wyckoff-style analysis. Keep this stock on your radar!More By This Author:How The Fed Announcements Could Shape The S&P 500’s Next Move
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