GG printed at least a 10-year high yesterday, at 56.20, then reversed and finished the session on an Inverted Hangman candlestick. Those aren't necessarily bearish. Look at the Inverted Hangman in February, just after GG broke above the Kumo. The next session was a black "Gap and Crap" candlestick, followed by a white one, then another black "Gap and Crap" candlestick, then GG took off to the upside. So, we don't want automatically to decide that yesterday's candlestick was bearish.
When a pattern breaks out or breaks down, I like to see the stock get to the target, or reasonably close, in at least the same amount of time that it took for the pattern to form. Sometimes, the target comes in late, but my feeling is, if this was a bullish (or bearish) breakout of any significance, what's the stock doing dawdling around and NOT getting to the target? I cases of "dawdling," I usually reduce my expectations.
The recent Ascending Triangle took seven days to form and breakout. Today is the seventh day since the breakout. Although GG got to within five cents of the Double Bottom target of 56.25 yesterday (see next chart), it's still well below the Ascending Triangle target of 57.23 in this daily chart. It's not only "dawdling," it had two "knuckle-biter" session on Wednesday and Thursday, where it traded back below the top of the Ascending Triangle. GG is back above the Symmetical Triangle, but it gets point deductions from its score for Technical Merit for both the "knuckle-biter" sessions and for the "dawdling."
The "knuckle-biter" sessions in the daily chart were caused by the morphing of the Third Ascending Triangle (pattern in yellow) into the Rising Wedge (pattern in red) that subsequently broke down at the red arrow. Whatever upside target was IN PLAY (I forget) on the Ascending Triangle breakout got CANCELLED right there at the red arrow. The Rising Wedge breakdown was "THE TELL," that the bullish Ascending Triangle wasn't bullish at all. It was a Fakeout/Breakout.
After the initial selloff, GG went into a Rising Channel/Bear Flag (pattern in blue). That broke to the downside, too. Yeeeeesh.
GG put in a low at 53.75, rallied to the 55.02 gap (white down arrow), and failed right there, confirming the gap as validated resistance. Yeeeeesh.
The next selloff was to 53.75, for a "possible" Double Bottom. Everything that GG did from the Fakeout/Breakout high (top of the red pattern) to this point was bearish. Often, in order to turn the situation around, stocks will have Fakeout/Breakouts (the pattern in red) and Fakeout/Breakdowns (the first white arrow) in order to get the proverbial everyone "wrong-footed," to get things started for a reverse in the other direction. Players have been lulled to sleep, as it were, saying, "Yes, that's bearish...yes, that's bearish, too...okay, the takeout of the 53.75...53.75 Double Bottom definitely is bearish, too ... we know the drill now..."
Oops! FAKEOUT/BREAKDOWN!!! (first white arrow).
That's the start of "Buying Begets Buying." Bears who have been short, or who shorted the Double Bottom breakdown see that they need to BUY to cover. Bulls see the quick recovery off the Fakeout/Breakout low, so they BUY as well.
The Bulls' first order of business on the ensuing rally was to knock out validated resistance at 55.00 (white down arrow), which they did. In addition to being validated resistance, 55.00 also was the pivot of the "W"-Bottom, or Double Bottom. Once that was taken out, we got 56.25 IN PLAY.
Math for the Double Bottom target:
55.00 - High of the pattern
53.75 - Low of the pattern (I use the more conservative number, so NOT yesterday's 55.66 low)
55.00 - 53.75 = 1.25 of upside, added to 55.00
55.00 + 1.25 = Target: 56.25 IN PLAY
Yesteday morning, GG opened higher, came back to 55.00 establishing former validated resitance as validated support (quite nice), then took off toward the target IN PLAY.
From the April 25 Comment Section:
"We can learn a lot from observation. I've observed, for example, that if roughly 75-80% of a target gets MADE very quickly without much pullback, that often is a good place to take profits, and re-enter at a lower price with achieving the target, or close to it, still in mind."
Yesterday's morning rally was very nice, but given the point deductions in the scores for Technical Merit and the fact that GG got to 75-80% of the target so quickly, I sold at the 75% marker.
75% of the 1.25 points that were IN PLAY is 0.9375 points, added to the breakout above 55.00 = 55.9375.
If the 56.25 target had gotten MADE, I would have "left some on the table" by selling early. But, we can see that if I had NOT sold early, I would have had the stock back in my face at the close, so that works both ways. In this case, since GG al-lmost got to the target and, again, because of the points deductions, I didn't "... re-enter at a lower price with achieving the target, or close to it, still in mind."
I didn't know when I purchased GG that I would posting on this trade (I normally don't post trades, other than the FCX trades that I've posted for learning purposes), so I don't have a screenshot of it. What I made on the trade isn't important anyway. What is important is understanding that targets just are "what we're aiming for," and understanding some of things that need to be considered when deciding where to take profits.
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