Sometimes the news leads the chart and sometimes the chart reveals the news. It’s the latter in this case as a massive spike forced this stock to appear on a lot of trader’s scans. When something like this happens the big question is why. Immediately digging in here you find whispers of a takeover and the door is still open to get in on this move.

In addition to the very obvious spike on this chart, there are other things to notice as well.

Let’s take a look at the chart and the news and see if there is a solid trade.

Each ticker has its own set of patterns, like a personality, that it displays pretty consistently. Once you unlock this “DNA” as it were, you can really exploit those moves and even the moves that are out of character for that ticker. I built an indicator that spots those patterns and lets you know when a trade is setting up. If you want to add it to your charts, click here.

Mattel (MAT) surged nearly 19% on heavy volume following reports that Authentic Brands Group has approached the company about a potential takeover. The reported interest could value Mattel at more than $6 billion, with a potential price above $20 per share. No formal sale process has been announced and there is no guarantee a transaction will occur, but the takeover interest provides a significant catalyst for the stock. Mattel also announced its first Mattel Wonder Indoor Waterpark and recently disclosed a CEO transition, adding to an unusually busy stretch of company-specific developments.

The chart turned sharply bullish with the news-driven move. MAT broke above its 8-, 21-, and 55-day moving averages, while ADX climbed above 28 and +DI surged to 51 versus −DI near 17, showing strong bullish directional momentum. RSI jumped to about 63 but remains below overbought territory, while PPO has crossed bullishly and moved higher. The sharp gap and takeover-driven nature of the rally increase the risk of a reversal if acquisition interest fails to progress, but continued strength above the breakout area could keep MAT in play as a bullish momentum setup.

Wishing you the best,

Wendy