In yesterday's Comment Section, Kevin said:
"I'm looking at the MS picture, and it looks like a giant head and shoulders with an upward sloping neckline..."
That would be the pattern in black in this chart.
"... the left should being where the symmetrical triangle in purple is..."
Right.
"... the right where the bearish rising wedge is..."
Right.
"... making the head a nested head and shoulders..."
Right.
"... if my terminology is correct...based on your chart and a piece of paper as a trend line, a break of 26.5 would put 21 or so in play."
Right. The neckline came in at 26.509 yesterday.
"...but then i look at today's chart and the neckline didn't seem to provide much support or resistance."
Morgan opened at 26.60, above the neckline, put in a low of 26.25, within twelve cents of the 26.13 target that is IN PLAY, then rallied to a close near the high of the session, and a close above the neckline.
We've seen quite often in the past how these "nested" patterns can produce nice moves once they break out or break down. Obviously, yesterday's intraday violation of the neckline wasn't good enough to be considered a breakdown, so the jury still is out on that.
29.29 is KEY RESISTANCE and "shouldn't***" get taken out to the upside. It was:
1) The high of the Bearish Rising Wedge, at Blue #4.
2) A failed retest of the neckline of the H&S Top (in red)
3) The high of the Right Shoulder of the putative H&S Top (in black)
*** After the breakdown of the March-April Symmetrical Triangle (in green), the high of that pattern "shouldn't" have gotten taken out. That pattern "morphed" (changed) into the Falling Wedge (in gray), and when the Falling Wedge broke out on April 30, it was an indication that the Morgan was going higher, not lower.
Very fine job on your analysis, Kevin. You get an A+, and you Go To The Head Of The Class ;)
5 comments:
thanks, melf.
melf
maybe i am seeing things. maybe i am seeing what i want to see, but GS seems to have the same thing forming, first neckline at 144.27-144.99, the second at 143.75.
also, i see what i believe is a "bear flag", an upward channel from 142.5 to 146. I know nothing about bear flags except that they are consolidation periods after downward drops. when the channel breaks, is the downside target the base of the channel? please impart some wisdom...
Hi Kevin,
My apologies, but I don't see either pattern that you mentioned.
Yes, when a Bear Flag breaks, the bottom of the "flag" portion of the pattern is a target, as is the measured move off the breakdown:
High minus Low of the flag, subtracted from where the bottom trendline of the flag is when it breaks down.
thanks, melf
i think i might be deluding myself based on my positions.
what do you look for in a bear flag? how do you tell a bear flag from a new upward trend?
Kevin,
You have to look at them on a case by case basis. For example, a Bear Flag can emerge right after the beginning of a strong, new trend higher (the flagpole), break down, but then the trend higher continues afterwards.
Other Bear Flags can appear at the end of an uptrend, and coincide with the beginning of a new downtrend. We only know in retrospect, as the stock continues down...down...down... that the Bear Flag was "the beginning of the end." There's nothing at the time that tells us, unequivocally, "This is THE END."
Bear Flags (and other patterns) aren't all the same, and we simply have to try our best to determine their significance, based on what the rest of the chart is doing.
In other words, there aren't any easy answers like, "When a Bear Flag shows up here, it ALWAYS means such and such..." There's no ALWAYS in the stock market. At least, I haven't found any ;)
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