WTK had a breakout yesterday

One of the timber stocks that had run up substantially since the recovery in timber prices is WTK. From early April until yesterday, WTK has risen from RM2.00 to RM2.61. The sharp rise of 26 sen (from RM2.35 to RM2.61) yesterday, happened after the share price broke out of a 7-month trading range at the RM2.40 level (see Chart 1 below). With this breakout, the stock is expected to reach a short-term target of RM2.80. The next target will be RM3.00-3.20.

We have to note that the share price has already increased by 30% in last 3 weeks. Despite the breakout, the sharp run-up might be followed by a short correction & the share price might drop back to re-test the breakout level of RM2.40. So, a trader, who has to weigh the risk to reward of entering now, might decide to wait. His decision might be different if the share price were lower (say, at RM2.45). On the other hand, if the share price were to break below the breakout level of RM2.40, a trader with position might decide to sell off his share, at a profit or a loss.


Chart 1: WTK's daily chart as at April 24, 2008 (courtesy of Quickcharts)


Chart 2: WTK's weekly chart as at April 24, 2008 (courtesy of Quickcharts)

This post serves to illustrate how you might trade WTK, following the steps in the previous post relating to Trading Technical Breakout. You would have probably identified this stock earlier- looked through its financial performance & noted its breakout level. When the breakout happened, you would then know how to act.