For the past FIVE years, iShares Goldman Sachs Natural Resources Index Fund ETF ($IGE) has been forming a pennant-like pattern that is only apparent on its long-term monthly chart:



A pennant is a continuation pattern that usually resolves itself in the direction of the dominant trend, which is "up" in this case. Furthermore, the longer the formation of the pattern, the more powerful the eventual breakout will be.

Since the beginning of this year, the trading range of $IGE has tightened up significantly and it now appears as though an actionable buy entry into this ETF may soon occur. Drilling down to the weekly time frame, notice that $IGE is poised to imminently break out above horizontal price resistance:



If $IGE breaks out above resistance, we will buy partial share size as a new swing trade entry. Subscribing members of our swing trading newsletters should note our exact trigger, stop, and target prices on the "watchlist" section of today's report.

Even if $IGE rallies above horizontal price resistance, upper channel resistance of its 5-year downtrend line (shown on the first chart) is still about another point overhead. This is why we are only targeting this trade with partial share size on the initial entry. However, if $IGE forms a strong weekly closing bar on higher volume, we would likely add to the position at that point.

Deron Wagner is the Founder and Head Trader of both Morpheus Capital LP, a U.S. hedge fund, and MorpheusTrading.com, a trader education firm.