Chart Patterns - Targeted moves

In response to email questions from readers:

The targeted move is the projected price move for a particular chart  pattern.

I do not make predictions: the market can go up or down at any time; it is only the probability (of each move) that varies. If a pattern is described as bullish, it means that the market has a higher probability of rising than of falling, and the opposite if a pattern is bearish.

 



Trading Diary
November 04, 2002

These extracts from my daily trading diary are intended to illustrate the techniques used in short-term trading and should not be interpreted as investment advice. Full terms and conditions can be found at Terms of Use .






USA
The Dow broke above 8600, attracting strong selling which drove the index back below resistance to close at 8571 on strong volume. A break above 8600 will be bullish and below 8160 bearish. The primary trend will reverse if the index rises above 9130.

The Nasdaq Composite Index gapped up but encountered resistance above 1400, closing at 1396, up 2.6%. The primary trend will reverse if the index breaks above 1426.

The S&P 500 opened strongly but encountered resistance, closing up 8 points at 908 . The primary trend is down. The index will complete a double bottom reversal if it rises above 965.
Microsoft leads tech rally
U.S. District Judge Colleen Kollar-Kotelly approves the anti-trust settlement between Microsoft and the government and nine states. (more)



Gold
New York: Spot gold is almost unchanged at $US 318.40.



ASX Australia
The All Ordinaries broke above resistance at 3000, closing up 1.4% at 3009. Low volume signals a lack of enthusiasm from buyers. The primary trend will reverse if the index rises above 3150.
The Slow Stochastic (20,3,3) and MACD (26,12,9) are above their signal lines, while Twiggs money flow signals accumulation.





Newscorp [NCP]
 NCP has completed a double bottom reversal after a long stage 4 down-trend. Relative strength (price ratio: xao) confirms the reversal; Twiggs money flow signals accumulation and the MACD shows a bullish divergence.





The double bottom pattern is completed by the breakout at [9] and confirmed by higher volume. The pattern started with a new low at [2] followed by an equal low at [3]. A short-term double bottom pattern was completed soon thereafter and the target was achieved at [4]. Price was unable to break above resistance at 11.00 and drifted lower to re-test support at [6] on lower volume.

This was followed by a rally back to resistance at [7]. The brief pull-back at [8] presented an opportunity to accumulate NCP at 10.60 to 10.65: when it rallied above the high on day [8]. The rally at [9] gapped up and broke the resistance level in the same day; another opportunity to accumulate the stock when it broke through 11.00. Tight stops can be placed below the low on day [8]: at 10.30 to 10.35. Buyers above 11.24 are taking on greater risk as the stop loss is more than 8% away. The prudent approach would be to wait and see if there is a pull-back to the 11.00 support level. 



The target is  is 13.56 (11.00 - 8.44 + 11.00), where 8.44 is the low at [2].


Lion Nathan [LNN]
Lion Nathan is in a slow upward trend - what Rocky/Bill McLaren would call a creeping trend. Observe that each new high offers little support to the ensuing trend and is frequently penetrated; the highs act more as resistance with up to 5 equal tops forming before a breakout.






Market strategy

Short-term: Take new entries where stops are tight. The Slow Stochastic and MACD are above their respective signal lines, but the Stochastic is in oversold territory.
Medium-term: Take new entries. Use stop losses to protect yourself against a sudden reversal.
Long-term: Wait for confirmation of the bottom reversal signal.

Colin Twiggs


Thought for the Day:

The master said: To learn something and then to put it into practice at the right time: is this not a joy?

The Analects of Confucius, 1.1.






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Colin Twiggs

Author: Colin Twiggs is a former investment banker with almost 40 years of experience in financial markets. He co-founded Incredible Charts and writes the popular Trading Diary and Patient Investor newsletters.

Using a top-down approach, Colin identifies key macro trends in the global economy before evaluating selected opportunities using a combination of fundamental and technical analysis.

Focusing on interest rates and financial market liquidity as primary drivers of the economic cycle, he warned of the 2008/2009 and 2020 bear markets well ahead of actual events.

He founded PVT Capital (AFSL No. 546090) in May 2023, which offers investment strategy and advice to wholesale clients.