Entering Cummins Engines (CMI)

We will be entering CMI at the close today as it has convincingly broken above long term range resistance and prior highs. We have been very close to a signal the past two weeks and today's action will trigger our entry.

Looking at the chart, the setup is very clean. I like to see very defined levels in my trades as that makes it very clear when to enter and when to exit. The Daily view shows a textbook bull flag, with today confirming the breakout.

You can see the flag here formed from the earnings report rally at the end of July. That initial rally (flag pole) was on massive trading volume and the subsequent consolidation (flag) came on steady, declining volume. This is exactly what we like to see with this type of pattern. It shows very strong interest in the stock, followed by a light and orderly profit taking by short term traders. It is also positive to see the pattern form and breakout at a well defined resistance level.

The Weekly view shows us where our risk will be monitored and also confirms our key entry signals:

The view here shows us a key pivoting location just below last week's strong weekly bar. This is also where the rising 20 WMA is located, so that will be the level we use to determine our trade validity. The Relative Strength chart shows a nice coiling triangle pattern that has broken to the upside, also signaling money rotating into the space.