MDLZ [Mondelez International] is showing symmetrical triangle pattern. It is bounded by 2 converging trend lines on both sides. It is very hard to predict the direction of breakout. Only way to find out is by continuously watching the stock price action or by following my blog 🙂 I will continue to update my post as breakout happens.
$Wynn has been trading in a range since 4/16. Please see chart A.There is a symmetrical triangle pattern developing within horizontal consolidation. Entry and Price Targets are clearly listed in the chart B. It is very important to stick to pre-decided prices to exit and enter the trade.
This shift in pattern from channel to triangle reveals interesting psychological behavior of traders. They are growing less confident of the direction of the trend and nobody wants to hold the stock for too long, which results in lower highs and higher lows. See numbered pivot points in chart B. Upper resistance line is showing lower highs and lower support line is showing higher lows.
Larger formations represent periods of greater uncertainty. They may be followed by another symmetric triangle, again indicating that traders are undecided about direction. If the symmetric triangle is resolved in the current trend direction, the trend is in full force, and a large price move is expected.
Triangles can be consistent indicators of investor confidence. Because they reflect human behavior, they are not always perfect in appearance and not always consistent in pattern. It takes experience to identify the formation in a timely manner.
Chart from 2/16-
- Consolidation patterns like this one can extend for a few weeks or many months. If the pattern is less than 3 weeks, it is usually considered a flag, which is a continuation pattern.
- Generally, the longer the pattern stays in the box, the more significant the breakout.
- The direction of the next significant move can only be determined after the breakout has occurred.
- The estimated move is found by measuring the height of the rectangle and applying it to the breakout.
- Being patient to enter until the breakout has been confirmed increases the probability of a profitable trade.
Few characteristics of a successful breakout-
- It sequels from some kind of consolidation pattern. It could be a channel/Triangle/flag/Pennant or something else.
- Increased volatility in price post breakout
- Increased momentum. Which means- More number of high days than number of low days. [High days = close>open , Low days = close<open]
- Some books/traders say increase in volume is seen as prices leave the consolidation zone, although I haven’t tested that.
Chart from 2/12
ABC Bullish Patterns are found everywhere but trading them takes skill. I was introduced to ABC BUllish Pattern by Suri Dudella. His work on patterns can be found here .
V [VISA] reached in the profit taking zone on 2/03 with a gap.
If it breaks out of channel from here and closes above 87, next profit target will be 95-98.