We got a late afternoon pop out this bullish continuation pattern, a Bull Flag, as the general market was tanking. The breakout puts a target of about 12.45 IN PLAY, reinforcing the 12.63 and 12.94 targets that already are IN PLAY.
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Thanks for your response to my question. As I understand your answer,it requires a retracement through the low of the pattern to invalidate the breakout. This was a good call on your part. I see a number of other bloggers are picking up on SLV now
"...it requires a retracement through the low of the pattern to invalidate the breakout."
Good Morning, Mark,
Yes, that's how I view it, but it depends on the pattern. Let's say, for example, that a Bullish Inverse H&S breaks out to the upside. If the stock then comes back and takes out the low of the Right Shoulder, I would consider the pattern to be invalid and wouldn't wait for the low of the Head to get taken out, which technically, is the low of the pattern.
Also, if after a breakout, a stock comes back inside the pattern and languishes there for days, I likely wouldn't wait for the bottom of the pattern to get broken. That's why I said that it's a pain in the neck when price comes back below a breakout because we then have to be thinking that it's a possible Fakeout/Breakout.
Mark,
For a good example of a pattern failure, look at the Channel Fakeout/Breakout at the beginning of the Ichimoku Kinko Hyo Chart (second chart) on this thread. See how it came back inside the pattern, went toward the bottom of the pattern, tried to rally, then broke below the bottom?
We don't have to wait for the actual failure to get out of there. That looked terrible. It's a judgment call regarding how long we want to stay, but when it broke down, that's a "GET OUTTA THERE."
Does that example help any?
"The breakout puts a target of about 12.45 IN PLAY..."
We printed a high of 12.44 at 9:46AM, ("close enough" to the target), sold off to 12.18, then printed 12.45 at 11:50AM, so the Bull Flag target has MADE.
Hopefully, we'll continue higher to the next target.
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