Many investors find trading a range to be a reliable trading strategy. It’s simple: look at the chart and find a share price that has bounced between two major levels several times. Buy low, sell high. Easy.

The strategy is very straightforward, which is why so many traders use it. They can confirm a proper range by looking for a minimum of 3 touches both at highs (resistance) and lows (support). Sure, breakouts and breakdowns do happen. But multiple bounces off support and resistance can form a credible range.

Buying low and selling high seems like the basics of trading, but many investors often find it difficult doing the reverse. Recently, we’ve seen many UK Index stocks trade with strong momentum, regaining recent highs. Are they at the top of the range?

Here are two well-known UK 100 stocks to compare. A Bank (Standard Chartered) and a Miner (Evraz).

Asia-focused bank Standard Chartered has been trading in a 596-639p range since late January, with 3 bounces off support and 5 touches off a clear resistance zone. The shares have already pulled back 1% from the ceiling today. Could it retrace recent gains, falling back to the floor?

Russian steelmaker Evraz, on the other hand, has been trading 457-589p since the Autumn, with a few meaningful tests of the floor. Not quite breakdowns, but almost. A reminder that not all ranges are perfect. It’s the general trend which is key.

And what about the top of the Evraz range? The shares currently trade 588p, having briefly tested October’s 589p all-time highs. Have the shares topped out? Are they on the way back down to the range floor?

Compare the Evraz and StanChart ranges. StanChart shares have multiple bounces up from support and pull-backs from resistance. Moreover, the most recent pull-back has already seen the shares fall by 1% . A good sign that the range ceiling remains intact, increasing the chance of a fall to the floor.

Evraz, by comparison, is only testing all-time highs; yet to confirm another leg lower. Morever, this is only its second test of this level. Ideally, you’d want to see a third pull-back to confirm the range. This third test is still probing higher. The shares could continue their current momentum, pushing further north. But don’t fret, the death of a range could well signify the birth of a breakout.

Evraz shares are already +32% from late-January lows. What do you think: will this strong momentum continue, or will the shares turn?

Which range do you find more convincing: Standard Chartered or Evraz? Perhaps you see more of a momentum/breakout opportunity here?

Every day Accendo Markets highlights similar trading opportunities to its clients: ranges, momentum, breakouts, rebounds and much more.

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Artjom Hatsaturjants, Research Analyst, 5 March 2019