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What chart patterns can you find? Look for the following (if you find others, great!): diamond bottom, 2 symmetrical triangles, 2 broadening tops, inverted and ascending scallop.
The answer is on the next slide.
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It's well after the downward breakout from the symmetrical triangle. Price pulled back into the pattern and eventually moved higher, busting the downward breakout.
A busted chart pattern suggests a strong rise.
Question 1: Do you buy or sell short the stock?
Question 2: What is your price target?
Question 3: What is your stop loss price?
See the next slide for answers.
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Note: I drew the triangle a bit differently in this chart from the prior one.
Answer 1 (buy?): Buy, but recognize that you're late to the party. That increases the risk of a failed trade.
Answer 2 (target?): I'd use the height of the triangle projected upward from the top of the chart pattern. Alternatively, you can draw a line from the top of the triangle
upward and parallel to the lower trendline. When it reaches the DAY of the breakout (and I'd use the lower breakout as a guide), then the position (price) of the line directly
above the breakout becomes the target price. I show this in the chart.
The green line is the one drawn parallel to the bottom of the triangle. From the downward breakout, the
price of the green line directly above becomes the target. Price reaches the target soon after buying.
Answer 3 (stop?): I'd place it at point A. A check of volatility says to place a stop no closer than 40.51, or 4.6% lower than the current close. I show the price as the yellow line.
Choose which one you prefer.
This chart shows what happened to the stock after buying. If you owned the stock, selling when price pierced the up-sloping red trendline would work well. It would have saved you from a world of pain.
The End.