Released 3/30/2022.
Below is a slider quiz to test your trading ability. Captions appear below the pictures for guidance, so be sure to scroll down far enough to read them.
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What chart patterns can you find? Look for the following (if you find others, great!): diamond top, high and tight flag, 2 rectangle tops, falling wedge.
The answers are on the next slide.
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The high and tight flag (HTF) measures from a low of 16.84 on 8/28/03 and rises to the top of the diamond at 38.25 on 11/14/03, a rise of 127% in about 2 months, qualifying
the rise as a HTF. The breakout is upward from the pattern and upward from the diamond. (For a HTF, price must climb 90% in less than 2 months and that was fulfilled when
price approached the bottom of the diamond).
Question 1: Do you buy, short, or avoid trading this 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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Answer 1 (buy?): Buy
Answer 2 (target?): Since the rise leading to the pattern is 127%, take half of that 63%, and that's the measure (it works 82% of the time).
Answer 3: Twice volatility is 3.61, suggesting a stop no closer than 35.14 or 17.9% below the current low would work well. Of course, that's much too far away, I think. I was going
to suggest placing it below the diamond bottom, but that's farther away. Thus, as bad as it is, I'd use the volatility stop or maybe place it a bit closer.
Price at point A is 51.65 and that's a rise of 35% above the diamond top, well below the projected target rise of 63% (and a corresponding price target of 48.96).
Question: is it time to sell or hold on for additional gains?
See the next slide for the answer.
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The correct answer is to sell. When price pierced the lower ascending broadening wedge trendline that was the sell signal. Selling then or near the pullback at B would have
saved you a bunch of money.
The End.
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