are these patterns correct?

[cashclay]

I thought that before trading like an idiot i should pratice , practice, and practice. I really want to start on trend and pattern trading and came across this chart. What i see here is broadening pattern and a small symmetrical trianlge at the end. Is this correct? And how is the resistance line that i drew?

[/IMG]

 

[cashclay]

I guess the triangle could kinda of also be a falling wedge, i dont really actually.

 

[Anon1]

I thought that before trading like an idiot i should pratice , practice, and practice. I really want to start on trend and pattern trading and came across this chart. What i see here is broadening pattern and a small symmetrical trianlge at the end. Is this correct? And how is the resistance line that i drew?

[/IMG]

Hi Cashclay,

Interesting question you ask that will give much controversial answers depending on who you ask.

What one see's and how one trades is and always will be totally different from one person to another. However, my take is a nice trend line upwards to 3350. I personally would look at trading that set up (given your own use and style and if I had to trade it of course) would be to look to get in a long position and be cautious of a break down to the lower level of around 3150. I would class this area as a potential support area before continuing its upward motion. So a stop loss would be set just below this level. Of course this would only be based on your set up of the graph and only during trading hours.

I wouldn't look to take this trade on the basis of the following:

RR (risk/reward) - exit level I would look for around 3500 based on recent highs shown on graph and as a potential resistance area. This being the case the RR would be around 1:1 so not good for what I have mentioned above. If anything I would look for a drop down to the recent lows and trade long off that - this level being around 3100 and potential support area.

IF I could get a price nearer the 3100 level then I would look to exit nearer the 3300 or even the 3500 area using a trailing stop. This would net an RR of more than 3:1 which is a golden area (or minimum in my opinion).

Everyone will have different trading ideas and patterns to trade off this graph and I hope that my basic idea has been of some help.

Disclaimer: I am a lousy day trader and never been profitable throughout my years. My particular style is long term swing.

Regards,
Anon

 

[tomorton]

Broadening pattern - agree. Price entered from above so a potential bottom. However, I believe these patterns are very unreliable.

Symmetrical triangle - agree. However, the exit point is normally 2/3 or 3/4 of the way from formation to the apex and price is now right into the point so I think this is a busted pattern and price may now be statistically unpredictable by the pattern. I still don't rate these as very reliable paterns anyway even when pristine.

Horizontal resistance line - level for this OK and picks up prior support. The thicker I draw support and resistance, the more accurate they are.

Overal though, this looks like a stock going nowhere fast.

 

[0007]

Take away the MAs and drawn lines and just look at the price. I can't see any trend over the 10 days and you will note that price at the start and finish is more or less the same. The best I can see in this chart is an oscillation in price while it's basically going sideways. Might appeal to the very short term trader but as a swing I wouldn't touch it.

 

[timsk]

Hi cashclay,

I thought that before trading like an idiot i should pratice , practice, and practice. . .

Very wise.
And then practice some more - on a demo account. Under no circumstances trade with real money unless and until you're completely confident in your trading methodology.

. . . I really want to start on trend and pattern trading and came across this chart. What i see here is broadening pattern and a small symmetrical trianlge at the end. Is this correct? And how is the resistance line that i drew?

Members can - and will - respond according to their own interpretations and definitions. However, what really matters at the end of the day is how you define each of these things. Does the pattern match up to your definition of a broadening pattern and a small symmetrical triangle? Have you drawn the resistance line according to your own definition and, if the answer to both questions is 'yes', is this enough to form the basis of a trade? If 'no', what else needs to be in place? If 'yes', what are you now looking for in order to take a trade and in which direction - long or short?
Tim.

 

[cashclay]

wow great info fellas, thank you for all that. im starting to def look at this chart alittel differently now

 

[cashclay]

Broadening pattern - agree. Price entered from above so a potential bottom. However, I believe these patterns are very unreliable.

Symmetrical triangle - agree. However, the exit point is normally 2/3 or 3/4 of the way from formation to the apex and price is now right into the point so I think this is a busted pattern and price may now be statistically unpredictable by the pattern. I still don't rate these as very reliable paterns anyway even when pristine.

Horizontal resistance line - level for this OK and picks up prior support. The thicker I draw support and resistance, the more accurate they are.

Overal though, this looks like a stock going nowhere fast.

Im just curious as to why you would this stock is going nowhere fast. what if the price broke beneath the support trend line of triangle. Wouldnt that indicate a strong short sell signal?

 

[tomorton]

Yes it would, fair play. But the trend down into the symmetrical triangle is short and weak, so the probability of a continuation through a downwards breakout, which is fair enough what should happen, is reduced, and the depth of the breakout weakened - there isn't enough selling pressure to offer a good follow-through. Also price has managed to avoid falling out of the triangle where it ought to (2/3 to 3/4 of the way towards the apex), again suggesting only weak selling interest.

Of course, if price does break down and you see strong confirmation that sellers are in control, you could get in short, samer as when any support line is broken. But wait for confirmation and use a stop.

Worth bearing in mind that theory of identification and trading of classic chart patterns like this was developed from daily charts decades ago and a triangle would take not less than 3 weeks to form. Just because you can count at least 15 intra-day bars doesn't mean its the same thing as 15 daily bars.