(Click On Chart To Enlarge)
If we hadn't had the "Gap To Crap" opening of 12.29 earlier this week, right at neckline resistance basis the weekly chart, and if we weren't back below the 11.95-11.94 Cup & Handle breakout basis the daily chart, I would have gotten back into XING on the Descending Triangle breakout yesterday.
Descending Triangles are viewed by some technicians as always bearish. I've looked at too many charts to be of the opinion that there is any "ALWAYS" in the stock market. LOL. Generally, though, I agree that Descending Triangles "tend to" have a bearish outcome, like Nucor in the second example at chart school, which looks similar to the XING Hourly Chart as far as the number of "hits" to the trendlines:
In XING's Hourly Chart, though, we got an UPSIDE breakout of this very well-defined Descending Triangle. Well-defined, because look at the number of "hits" to both trendlines.
After Data Point #4, we have the parameters of the Descending Triangle established. Descending highs, and two lows that are relatively equal in price. Now we'd like to see some confirmation of those trendlines.
At #5, the market is telling us, "Yes, that's a validation of support."
At #6, "Yes, that's a validation of resistance."
At #7, "Yes, that's ANOTHER validation of support."
Then we got the UPSIDE breakout. The lack of volume is a defect, though. When there's resolution to any pattern, we like to see volume come in, in recognition of the breakout (or breakdown). We didn't get it. That's not fatal, but it is a defect.
For XING to have held the 11.50-ish support all week, in a generally down market, is impressive. If volume had come in on the breakout, I would have bought 11.79, but I passed because the volume was weak, and because of the resistance in the daily and weekly charts.
The Descending Triangle targets IN PLAY are 12.29 and 12.57, as long as the breakout holds. Targets are less likely to get MADE when the breakout is headed into resistance, so we have to keep that in mind, particularly with the "tendency" of Descending Triangles toward bearishness.
I'd like to see at least ONE of the targets get MADE, though :)
3 comments:
Good chart, even didn´t quite undertand what those number labelling means.
I found pretty much the same with another chinise mobilephone chart.
http://bp2.blogger.com/_Wt9bhJccdPw/RxgZqDc42VI/AAAAAAAABH4/PyEhEWo2x9M/s1600-h/Qiao+Xing.gif
http://bp1.blogger.com/_Wt9bhJccdPw/RrZYOlY3e3I/AAAAAAAAAZ0/RRo1if2He8M/s1600-h/CNTF.gif
Mika,
Thanks for the charts.
Technicians have different ways of labeling, or numbering, patterns. I like to start at a high or low, with #1, to see if a discernible pattern emerges.
In this case, the hourly chart, start at the reaction low after the selloff from 13.38, and put #1.
At the first high, put #2.
Next low, #3
Next low, #4.
Now we can connect the two highs and the two lows with trendlines. We can see that we've got a Descending Triangle, so now we can watch what happens to see which way it breaks out.
#5 DIDN'T break the lower trendline, telling us, "Yes, that's support." That's good information. It's called a TRENDLINE VALIDATION.
#6 DIDN'T break out above the upper trendline, telling us, "Yes, that's resistance." The stock can't make it above that. That's another TRENDLINE VALIDATION.
#7 Told us AGAIN that the lower trendline is support. That's a second TRENDLINE VALIDATION.
On the next move up, XING got above Trendline #1..#3...#5, telling us that descending trendline no longer is resistance because XING was able to break above it, thus the term "technical breakout."
As I said earlier, breakouts and breakdowns tend to be better if they are accompanied by volume. Yesterday's breakout WASN'T confirmed by volume, so it's a little suspect, meaning that the targets are less likely to get MADE.
(Next low, #3
Next low, #4.)
Mika,
Sorry, that should have said Next HIGH #4, not low.
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