Goldman - Another Symmetrical Triangle - Another Possible H&S Top

Goldman put in Bearish a Doji-Star Hangman on Thursday, just below Gap Resistance. Friday morning, it gapped down at the open, but as has been Goldman's wont off the November low, it refused to die. It put in a low early in the session, then settled into a nice little Symmetrical Triangle pattern, similar to Thursday's pattern.

Just as I did on Thursday, I got long Goldman after Data Point #4 was established, but UNLIKE Thursday, when Goldman broke out and rallied close to the 92.60 target IN PLAY, I took the money. Sold it at 92.35 for a $1,000+ gain with a plan to re-enter on a selloff.

I got the selloff and re-entered long, but after an hour of boring price action in a market that looked weak, I threw it in for a $200 gain. That worked out fine. Athough I wouldn't have been stopped out for a loss, I essentially got my intended gain on the pattern play (within five cents), which was my plan.

The 92.60 target did end up getting MADE, by the way. High on the day was 93.38.

I was hoping for a rally in Goldman that would help to take Morgan back to it's opening gap so that I could short Morgan at the broken neckline of its H&S Top, but I didn't get the rally in Morgan. It remained weak throughout the session.

One of the reasons, technically, that I think Goldman has acted so strong lately is the fact the in the Hourly Chart, it "looked like" Goldman was putting in a H&S Top. The volume didn't have the right look, but the pattern did. When the "theoretical" Right Shoulder got taken out to the upside, Bears who had jumped the gun were in trouble. As we can see, the recent trading has been above that 87.77high, with the exception of the two nominal breaks, which now look to be the neckline of a "possible" H&S pattern again!

The volume in this "possible" H&S Top DOES have the right look to it. Highest in the Left Shoulder ... next highest in the Head (little volume spike on the move down to the neckline from The Head), then weakest in the Right Shoulder, indicating a diminution of buying interest.

Classically, the width of this "possible" Right Shoulder should be narrower than the Left Shoulder, but I've seen plenty of these patterns have wider Right Shoulders, and work out fine. Case in point: the last of the Right Shoulders in the TRIPLE H&S Top in Goldman, back in January, was wider than the Left Shoulder and the downside target got MADE and exceeded by quite a bit, so we won't worry too much about that. The more important thing, in my view, is whether or not the neckline gets broken to the downside. If Goldman is called Gap Down in the 87.30- 87.50 neckline area, that would solve that "width" problem, wouldn't it? LOL.

If the neckline of this pattern gets broken, that would put roughly 80.95 IN PLAY, which still would be above lateral support in the daily chart above, so Goldman still wouldn't die at that price. LOL.

We need to be aware, also in the daily chart, that the overhead gap hasn't been fillied, so absent horrible news over the weekend, if the market rallies, Goldman could rally some more and make a bid for that gap. Also, let's remember that in the Hourly chart, Goldman pulled a surprise to the UPSIDE, taking out the 87.77 high of the "theoretical" Right Shoulder, so it "ain't a done deal."

I forgot to capture the Real-Time execution page at Scottrade, and it's gone, so here's the Order page with the Reference numbers crossed out for my privacy. I've been posting these trades with my rationale for making them for the past few days for learning purposes and to encourage anyone who has read them to continue to learn, and to have a plan for trading, certainly not as a brag. They aren't huge amounts, anyway. This one was a gain of $1,200+. I just try to hit singles, and try to keep banging it out ;)

Goldman And Morgan

Looking at this Goldman chart, we'd never know that the general market has been teetering near its lows. Goldman still is up 94% off its November low.

A couple of observations about the chart:

1. Goldman had what appeared to be a beautiful TRIPLE breakout of an Ascending Triangle on December 30. Unfortunately, it morphed into a Bearish Rising Wedge, and Goldman got smacked very hard when that became apparent, when it took out the lower trendline of the pattern.

2. When a Bearish Rising Wedge gets broken, probably most technical analysts/books will tell us that the expectation is a return to the low of the pattern. I don't find that to be true. Often, the stock or index stops well above the low of the pattern, as Goldman did in this chart. I like to use lateral support levels as targets, which in this case would be Blue #4 (65.50) and Blue #2 (60.22), which were the lows of the nested Symmetrical Triangle (pattern in blue) for targets to take profits, or at least some profits, on a short position. We don't want to over-expect on trades. Goldman bottomed at 59.13 in January, so those targets both got MADE.

3. In early February, Goldman filled the 78.65 gap and staged a strong rally. In the recent selloff, that gap area again was support. Goldman is showing very good relative strength. For that reason, I played it long yesterday when I saw that it came back and filled the morning gap, and was forming an Ascending Triangle.

I got long Goldman at 91.89 after White Data Point #4 was established. On a breakout, the pattern target was 93.17. It broke out, and ANOTHER pattern emerged, the Symmetrical Triangle in yellow. The pattern target on that breakout was identical: 93.17. When you get multiple pattern breakouts, and when targets are close to each other, the chances of getting the targets are very good.

Once the Symmetrical Triangle broke out, I raised my stop to the "last low" of the pattern, 92.01, at Yellow #4. The low of the pattern was 91.87, and the breakout still would be valid unless/until that was taken down, but my entry was 91.89 and I wanted at least a small gain on the trade, so I used the 92.01 stop.

Lord, did I get punished for that! The market doesn't know what WE want, nor does it care. LOL. After the two breakouts, Goldman rallied nicely toward the 93.17 target, but then reversed and came back in my face and took out my 92.01 stop. I hit the sell buzzer and fortunately good a good fill at 92.05, but was disappointed that the trade didn't work out as planned. I made a paltry $150, or so.

Guess what? Goldman sold off to 91.87, the EXACT low of the Symmetrical Triangle, which "should have been" my stop (91.86), held right there, then rallied directly to 93.20, three cents above the 93.17 DOUBLE target. I "woulda" made $1,200+ if I had used the low of the pattern as a stop. Sheesh...

If the "last low" had been significantly above the low of the pattern, which it often is, it can be a significant difference in the amount of risk, but the difference in this case was very small. LESSON: "Don't be cheap when the choice of stops is insignificant. Use the LOWER one." Especially on a DOUBLE pattern breakout. Sheesh...

While I was sitting here slapping myself as Goldman got to the 93.17 DOUBLE target (Get over it, Melf), I noticed that Morgan was trading at 22.65, right near the bottom of the broken Bear Flag (resistance), which came in yesterday at 22.765. On Wednesday, it filled the 22.93 gap EXACTLY (high was 22.92), and failed, now here it was back for another test of the broken Bear Flag!

I shorted Morgan right there, at 22.65. At about 12:30, Morgan had sold off to the low $20's, but Goldman still was looking strong, putting in new highs on the day, so I covered my Morgan short at 20.03 for a nice gain of $1,500+, then went back to slapping myself over the Goldman trade. LOL.

I was long 1,000 Goldman. They don't all show up at the top of the page because they fill you in those annoying little 100 share batches, I have to scroll to see them all.

Newmont Mining: Bearish Wolfe Wave; H&S Top

I re-entered AEM short yesterday morning, but didn't like how it looked to be coming back in my face, and NEM kept flashing new highs on the day. That kind of strength after the pattern breakdowns on Tuesday in both stocks wasn't what I expected at all, so I covered my AEM short for a small gain, and decided to watch the price action in NEM. "When in doubt...get out."

As it turned out, I would have been fine staying short AEM. The 49.50 target got MADE, but I switched to NEM and did alright.

NEM had broken and CLOSED below a Bear Flag/Rising Channel in the daily chart on Tuesday. After that kind of break, I wouldn't expect NEM to take out Tuesday's high, but that's exactly what it did. That looked VERY suspicious, especially at the the new high above Tuesday's high, which looked like a Bearish Wolfe Wave #5 Fakeout/Breakout!

Shorting NEM when it came back inside the Wolfe Wave pattern after the Wave #5 Fakeout/Breakout would have been fine, but I decided to wait for a break of the bottom of the pattern, 42.15, and I shorted it right there.

Interestingly, the Wave #6 target line came in right about at the 41.51 low of the Wolfe Wave pattern. As NEM sold off into the 41.50's, I hit the "Buy to Cover" buzzer and got filled at 41.5698. How do they come up with those strange numbers?

The Bearish Wolfe Wave #6 low ended up being EXACTLY 41.51, which was the low of the Bearish Wolfe Wave at Wave #2, so that set up a neckline for a possible "morph" into a Bearish H&S Top, for which Bearish Rising Wedges and Bearish Wolfe Waves are notorious.

I re-entered short at 41.90, which turned out to be a penny below the high of the Right Shoulder. The 41.51...41.51 neckline broke to the downside, putting a target of 40.37 IN PLAY, but we can see that there was horizontal support at 40.80 along the way, so when NEM sold off into the 40.80's, I hit the "Buy To Cover" buzzer again and got filled at 40.8698, another "weird" fill.

NEM put in a low EXACTLY at 40.80 and began to rally back toward the broken neckline, at 41.51. I planned to short it AGAIN in the 41.40's,but didn't get the chance. That's fine. I had an enjoyable, profitable day of trading, and I'm always grateful for those ;)

SPX, AAPL, MOO, AEM

From yesterday morning:

"The overnight risk of a huge gap down in the futures is removed (futures currently are up a few points), so playing the SPX long for the Double Bottom certainly is reasonable, but I don't like the market well enough to play it. I particularly didn't like the action yesterday in the MOO, or in AAPL"

I preferred to be short AEM, but playing the SPX for at least a short-term Double Bottom not only was reasonable, it got a lot more reasonable when the SPX broke out of an Ascending Triangle yesterday afternoon at 758, and when the 774 target got MADE.

At the 743 close on Monday, the MACD histogram was at a "higher low" than where it was at the 804 January 20 low, suggesting a positive divergence on any rally. We can see that the histogram did tick higher on yesterday's rally. In a Bear Market, we can have positive divergences and even DOUBLE positive divergences, and price still goes lower, but positive divergences also can produce sharp rallies, as we can see off the October 27 low, and again off the November 21 low.

In my view, technical indicators don't TELL US to Buy or Sell. They don't know what the price chart looks like. I view them as information about the technical condition of the price chart, and when there are crossover signals and divergences, I view them as "invitations" rather than ORDERS to Buy or Sell.

Yesterday morning, for example, all that the MACD was "telling us" was, "The histogram is higher than it was at the January 20 low, and it's positioned to tick higher for at least a short-term positive divergence on a rally off this 'possible' Double Bottom at 743. Would you like to BUY this low-risk entry long the SPX?"

Those who accepted the invitation got rewarded, especially if they "took profits, or at least some profits," when the Ascending Triangle target of 774 got MADE.

The MACD itself still is pointing down. If yesterday's rally in the SPX gets legs, the MACD has a way to go, to get up to its declining signal line. If it does that, we could get a "Kiss Of Death" signal, similar to what we got in September (see the Skull and Crossbones on the chart). That was UG-UG-UGLY! The MACD turned down from the failed back kiss of its signal line, and the SPX tanked nearly 500 points, just from there. Yeesh!




Tuesday's close in AAPL, $2.00 below 88.90-89.00 support, concerned me. I don't like breaks of support like that. In yesterday's trading, a failure at/near that broken support would have confirmed the breakdown, like XOM did when it had a DOUBLE pattern breakdown. AAPL didn't fail at 88.90-89.00 support, as it "should have," so at the moment, the breakdown is a Bear Trap as long as AAPL remains above 88.90-89.00.


Similar to AAPL, the MOO rallied back and closed well above broken support, so that's also a Bear Trap unless/until the MOO goes back below the DOUBLE validated trendline.

What an unorthodox-looking 184% rally in AEM! Off the "dead drop" decline from September-October, AEM formed a Bear Flag/Rising Channel, a pattern which more often than not, has a bearish resolution. It had an UPSIDE resolution. On the way to the 58.25 target IN PLAY, December-January sure looked like a Rounding Top, just below the 200 DMA. That also had an UPSIDE resolution.

In the current time-frame, AEM failed at the top of the Symmetrical Triangle last Friday and again on Monday. Yesterday, it gapped higher at the open, which was the high on the day, then broke the bottom of the Symmetrical Triangle, at 51.63, finishing out the session at 50.61 on a Bearish Engulfing candle that engulfed the prior five days' real bodies.

That sure "looks" bearish, but I wouldn't put it past AEM to "morph" (change) into a Bull Flag here, given how deceptive that 184% rally was! LOL.

SPX: Ascending Triangle

The highs of the Ascending Triangle were the 758.27 high at 2:30PM yesterday afternoon and the 758.39 high at 10:40AM this morning. When those got taken out AT 1:26PM this afternoon, that put an upside target of SPX 774.17 IN PLAY.

Math for the target:

758.27 - (The more conservative of the two highs)
742.37 - The low of the Ascending Triangle

758.27 - 742.37 = 15.90 points of upside, added to the breakout.

758.27 + 15.90 = Target: 774.17 IN PLAY

The target got MADE at 3:15PM

SPX, NASDAQ, MOO, AAPL, XOM

Friday's Bullish Hammer was a fooler. The low of that candle got taken down, and the Symmetrical Triangle target of 750.64 got MADE. With that target out of the way, the SPX still is looking for a near-term bottom here at Blue #4, and also looking for a Double Bottom with the November low. The overnight risk of a huge gap down in the futures is removed (futures currently are up a few points), so playing the SPX long for the Double Bottom certainly is reasonable, but I don't like the market well enough to play it. I particularly didn't like the action yesterday in the MOO, or in AAPL (see charts below).


The NASDAQ was down 53 points yesterday, and closed a point off its low. 1340.14, another 47 points below here, still is IN PLAY.

In the MOO, the trendline off the December 22 low was a TWICE validated trendline, and a QUADRUPLE Bottom. It was broken in yesterday's trading, completing a Double Top (31.13 and 30.87), and putting a downside target of 20.67 IN PLAY, as long as the MOO trades below that broken support.

Coming off the Bullish Island Reversal, which was a two-year low in the stock, AAPL hit its marks beautifully. It rallied to the top of the Falling Wedge for a DOUBLE trendline validation of resistance in late January, pulled back and found support at the Bullish Cross of the 20/50 Day Moving Averages, then broke out of the Falling Wedge to the upside. LOVELY.

Pullbacks to pattern breakouts are to be expected, but they're expected to HOLD, as support. On Friday, AAPL did just that. The February 2 low at the Bullish Cross of the 20/50's, prior to the upside breakout, was 88.90. On Friday, AAPL gapped down and tested that low, and also tested the top of the Wedge. It held at 89.00, then rallied nicely into the close for a successful DOUBLE validation of horizontal price support, as well as the top of the Wedge. LOVELY.

Yesterday, APPL broke below the 88.90-89.00 DOUBLE validated support, and CLOSED about $2.00 below it. That "could be" some kind of Bear Trap, and we'll know that if AAPL reverses yesterday's nasty candle, but...but...but...YUK!!!

From the weekend...
"It's interesting how close targets can come to getting MADE. Friday's low was 70.21, within fourteen cents of the target. Ooo-oo, that was close! LOL."
Okay, okay, XOM only was toying with us. The 70.07 DOUBLE target ended up getting MADE yesterday. LOL. 65.64 still is IN PLAY from the Symmetrical Triangle breakdown.

NASDAQ & SPX: Targets

As we've frequently discussed, pay attention when a validated trendline gets taken out because it usually has some significance. When we looked at the NASDAQ a week ago, we knew that we had an EXACT trendline validation, at 1495, on February 12 (Purple #5).

Tuesday morning, the index opened below it, at 1489.12, briefly rallied to a high of 1492.82 which still was below the 1495 validated trendline, leaving a gap on the chart AT the validated trendline, and that was all she had. Down...down...down...

Both the 1460.51 and the 1434.08 targets got MADE.

In the SPX, the Symmetrical Triangle target came within four points of getting MADE. As we've also discussed many times, targets aren't exact. When you get tha-at close to a target tha-at quickly, take the money! "Don't step over dollars to pick up pennies."

In the Ichimoku Kinko Hyo chart ("At A Glance...The Table Of Balance"), we can see that the SPX put in a Bullish Hammer on Friday which, at the moment, is Data Point #4 of a downward sloping channel. That candle only is bullish, of course, with upside follow-thru. On a rally, former support "should be" resistance.

Last meaningful support was the low of the broken Symmetrical Triangle, 804.30, so that now becomes first meaningful resistance, although the SPX certainly could fail below that level. Given the "dead drop" nature of the selloff from the broken Symmetrical triangle, and given how short-term oversold we got, I'd expect the SPX to make a bid for 804.30 resistance this week, or close to that. 800.38 is a .382% retracement of the selloff from the February 9, so 800.38-804.30 seems to be a reasonable expectation on a rally.

On a strong rally, the bottom of the broken Symmetrical Triangle and the top of the Channel off the early January high converge at roughly SPX 833, on March 2. That would be DOUBLE resistance there.

XOM: The 70.07 Double Target

From February 13 comment section:

"The second Bearish Rising Wedge (pattern in purple) put 70.07 IN PLAY, which also is a 50% retracement of the Bearish Rising Wedge (pattern in blue) ....

Math:

80.50 - High of the pattern
74.01 - Low of the pattern

80.50 - 74.01 = 6.49 points of downside.

The bottom of the pattern was at 76.56 when it broke on February 10 76.56 - 6.49 pts. - 70.07 IN PLAY.

When you get two targets that are nearly the same (70.07), that increases the chances of getting it, but never any guarantees of course."

It's interesting how close targets can come to getting MADE. Friday's low was 70.21, within fourteen cents of the target. Ooo-oo, that was close! LOL. After nearly three months of sideways trading, XOM has come down to the DOUBLE target very quickly off the DOUBLE pattern breakdown. In an oversold market like this one, it's not a bad idea to cover or at least take some profits when you get this close to a target, if you're short (I'm not...I missed my entry back at the breakdown), and lock in a winner.

65.64 still is IN PLAY. Given the fact that the Symmetrical Triangle (pattern in red) breakdown already has been retested and failed, this looks fine for more downside, eventually, but you never know. "Take profits, or at least some profits, when targets get MADE," or when they come this danged close ;)

Goldman: Triangle Breakdown

Both Goldman Sachs and Morgan Stanley have been very strong off their autumn lows, particularly Morgan, but there have been opportunities to short both of them, as we've seen in the recent posts on Morgan Stanley.

Goldman put in this TRIPLE H&S Top, which I posted here in January. The TRIPLE nested patterns measured to a target of about $72, but Goldman went well below that, to 59.13, for a loss of 36% in just two weeks' time.



Tuesday morning was another nice shorting opportunity. Goldman had a Breakaway Gap down to 92.24 from a Symmetrical Triangle, which put a target of roughly 83.54 IN PLAY. It's difficult to measure these Scottrade charts exactly, but we don't need to be exact. The target MADE with no problem and was exceeded on the downside. GS traded at 81.07 yesterday morning.

Anyone shorting the 92.24 Breakaway Gap down not only was justified for doing it, they were handsomely rewarded for doing it when the target got MADE, as they should be. That's the way these patterns and targets are SUPPOSED to work, dang it! LOL.

Morgan Stanley: Past Was Prologue

From February 15:

"...if past is prologue (H&S Top in the Hourly Chart after a big rally), the Bears will capitalize on this opportunity."


From Friday's close of 22.93, the Bears knocked Morgan down 18% to a low of 18.82 in less than a day and a half of trading. The 19.48 target (low of the Bear Flag pattern in the daily chart below) MADE in the process.

"Take profits, or at least some profits, when targets get MADE." Particularly, in my view, in a stock that has been in such a strong intermediate-term uptrend in a dreadful Bear Market. Morgan has rallied 264% in just four months' time.

Yesterday's candle was a Bullish Hammer. It's only bullish, of course, with upside follow-thru. The neckline, which comes in today at 21.74, hasn't been retested and there's also an unfilled gap in the daily chart just above the neckline, from 22.06-22.20. Those levels are Key Resistance on any rally.

SPX, NASDAQ & MS Targets

The SPX broke the Symmetrical Triangle on a gap down opening, leaving a gap on the chart at the bottom of the pattern from 818-824. That's key resistance on any gap-filling rally to retest the breakdown.

Math for the downside target:

877.86 - High of the pattern
804.30 - Low of the pattern

877.86 - 804.30 = 73.56 points of downside from where the lower trendline was when the breakdown occurred. (824.20)

824.20 - 73.56 = Target 750.64 IN PLAY

The targets are at the top of the chart. The first two are the lows at Purple #3 and Purple #1. The third target is the measured move (like we just did for the SPX) from the point of the breakdown. This pattern could morph into a H&S Top right near here. The neckline would be the low of Purple #3 and whatever low we make right here. We'll look at an example of how that would look in the last chart below.


The H&S Top (Hourly Chart)/Bear Flag in the daily chart broke to the downside at 22.31. Targets are the low of the pattern and the measured move off the breakdown, calculated the same way that we did in the SPX chart above.

It's fairly commmon for Bearish Rising Wedges/Bear Flags to "morph" (change) into a H&S Top. If that's going to be the case, we'll put in a low somewhere near the 19.28 low of the Bear Flag, rally for a Right Shoulder, preferably on low volume, then break the neckline, per the arrows.

SPX & NASDAQ: Support Levels

The market currently is called gap down at the open, so unless the futures should stage a huge rally (very unlikely), the SPX will gap down below the Symmetrical Triangle (pattern in blue), the bottom of which comes in today at 824.20.

The low of the little candle on January 13, circled in red, was a trendline validation, meaning that it was the third hit to the trendline telling us, "Yes, that IS support!" As we've observed so often, those trendline validations usually have some significance, especially when they're part of a pattern, as this one was. It was the low of the Ascending Triangle (pattern in purple) that had a Breakout/Fakeout that ended in a Bearish Wolfe Wave #5 Fakeout/Breakout in the Hourly Chart, which we discussed the morning of January 6.

That validated trendline not only was significant when it broke to the downside, it also was significant at the SPX 877 and 875 highs of the current Symmetical Triangle (Blue #2 and #4). The first rally got through the trendline by a hair; the second rally got refused just about smack on the purple trendline, which became validated resistance telling us, "You aren't getting through there." Confirmation of that is when a pattern gets broken to the downside, or when a new low is made. We'll get the former at the open and if the 804.30 low of the pattern gets taken down (Blue #1), that's further confirmation.

One last thing: Notice that the bottom of the Symmetrical Triangle had been violated by about 15 points on Thursday afternoon at the Obama Stick Save. Let's look at that candle in this NASDAQ chart:



The Obama stick save was an exact trendline validation (less than fifty cents) of the bottom of the Rising Channel/Bear Flag. The weaker SPX was acting sloppy, but the stronger NASDAQ nailed that trendline, telling us, "Yes, that IS support." We know from the example of that little red candle in the SPX chart (January 13) to be careful when a validated trendline ISN'T any longer support.



In the Ichimoku Kinko Hyo chart ("At A Glance...The Table of Balance"), we can see that the NASDAQ has been trying to turn the corner and get above the Kumo (Cloud)resistance, represented by the vertcal lines, and begin to trend higher. The current Rising Channel/Bear Flag wouldn't appear to augur well for that occuring, but we know that anything can happen in the stock market.

If the SPX breaks the 804.30 low of its Symmetrical Triangle, it could "bounce out of nowhere" like it did on Thursday afternoon at the Obama stick save if the NASDAQ finds support at/near:

1. 1504.56 - Bottom of the Rising Channel/Bear Flag, which is a validated trendline.
2. 1488.17 - The trendline off the November 21 low.
3. 1480.55 - The bottom of the Kumo (Cloud).

Morgan Stanley: If Past Is Prologue...

I posted this chart here in mid-January, after Morgan had rallied a whopping 212% off its October low. Don't let anyone tell you that Bear Market rallies aren't worth playing. Whew! In this chart, however, Goldman ran out of steam and finally completed a H&S Top after the three month rally. I posted it, at the failed back test of the neckline.

The broken pattern put a downside target of something like 14.77-14.90 IN PLAY (I can't measure these Scottrade charts as accurately as I can my Metastock charts).



The downside target MADE with no problem. Goldman bottomed at 13.10 and staged ANOTHER outstanding rally to 22.44, thus far, for a gain of 71% off that 13.10 low. These rallies have been in a terrible market environment, and on HORRIBLE December earnings out of Morgan, which is testimony to "Play what you SEE, not what you THINK," and it's also an example why I ignore the fundamentals and pay attention only to the REACTION to the fundamentals.

At the recent high, Morgan was up a sizzling 264% off its October low, despite December earnings being an incredible 600% worse than the estimate. Positioning short in Morgan based on the horrible fundamentals certainly "seemed" to make a lot of sense on the face of it, but the market doesn't always makes sense, and we would have been led woefully astray on a wicked short squeeze.

As we can see in the next chart, after the 71% rally off the 13.10 low, the Bears once again are presented a chance to knock Goldman down on the chart technicals and if past is prologue (H&S Top in the Hourly Chart after a big rally), the Bears will capitalize on this opportunity.



Compare this "possible" H&S Top with the one that formed in mid-January (Chart #1). This one is broader in width, and it contains two other patterns "nested" within the larger H&S Top formation. The Head is a Descending Triangle; the Right Shoulder is a Symmetrical Triangle. As I've said and demonstrated a number of times before, "nested" patterns tend to pack some punch when they break out or break down (remember the TRIPLE H&S top in Goldman that I posted in January?).

Never any guarantees, of course, and I'm also not assuming that this pattern will break to the downside at all. "Possible" H&S Tops can and do break out to the UPSIDE, so we need to be aware of that.

The volume pattern as it stands favors a bearish resolution. Classically, in a H&S Top, volume should be heaviest in the Left Shoulder, next heaviest in the Head, then lowest in the Right Shoulder, indicating a diminution of buying interest. If the neckline breaks to the downside, it should be on increasing volume. I'm not rigid about conforming to classic standards, though. I've seen plenty of H&S patterns that don't conform at all to classic standards and they work out just fine, particularly on intraday charts. It's nice when they do conform, however.




This daily chart gives us the big picture of what has gone on with Morgan since the Bullish Island Reversal low on October 10 and the Bullish non-confirmation of the low in the general market, on November 21. Notice that the Bullish Falling Wedge (pattern in black) target 0f 24.52 that we've had outstanding since the early January breakout came within eight cents of getting MADE at the February 5 high of 24.44. That's mighty close, given that targets are just "what we've aiming for" based on pattern measurements. We can't expect exactitude.

The Bullish Inverse H&S (pattern in blue) target of 25.34 still is IN PLAY. Just as the intervening H&S Top (little red circles) temporarily trumped the 24.52 upside target, we might get something similar here. The downside target got MADE, then the 24.52 target got MADE (within eight cents). Charts are dynamic and we have to follow the play as it unfolds as best we can, and that isn't always easy.

The neckline for the "possible" H&S Top in the Hourly Chart (Chart #3) comes in on Tuesday, February 17, at 21.33 so a print of 21.32 would be a technical violation of the neckline. It's probably a little different on the Hourly Chart, but that's roughly the area of a possible breakdown. The slope of the neckline is $0.205 so we add that amount each day. The neckline will be at 21.525 on February 18; 21.73 on February 19, etc.

Goldman: Pattern Analysis, Establishing Targets, And Structuring The Trade

While I was watching XOM yeaterday to see if it was going to make a bid for the bottom of the broken wedge, at 77.01, I noticed that Goldman had just put in Data Point #4 of a Symmetrical Triangle, after its parabolic run-up late Thursday afternoon. That pattern "should be" a bullish continuation pattern after a power move like that on some volume.

I entered the trade at 95.45 with a mental stop at "something" below 95.00 (Data Point #2) to allow for a morph into a Bull Flag, but I wasn't going to give it very much room on the downside if it looked like it was going to do more than form a Bull Flag. Those moves have to be watched carefully so that the trade doesn't run away from us on the downside. Once I entered the trade, I moved to the 1-Minute chart.




Goldman got back up to the top of the Symmetrical Triangle at Data Point #5 (#5 in the first chart) and temporized there for a bit on low volume. At that point, I wasn't interested in seeing anything below 95.00, so my risk on the trade was $0.46, or a little more on whatever they gave me on a market order to sell at $94.99, which was a penny below the 95.00 low of the pattern at Data Point #2 on the first chart.

That's the risk. Now, what's my potential reward on the trade?

The highs of the pattern were 96.25...96.20...96.15. I always use the more/most conservative of my choices in establishing a target in an effort not to be overly ambitious about it. Most traders probably would use the 96.25 high, which is perfectly fine, of course.

96.15 - The most conservative of the three highs
95.00 - The low of the pattern

96.15 - 95.00 = 1.15 points of upside on a breakout

96.15 + 1.15 points = Target: 97.30 IN PLAY

From my 95.45 entry, the reward if the 97.30 target gets MADE is $1.85, so the risk:reward...lose $0.46 vs. gain $1.85...is 1:4, which is quite nice. If we consistently structured trades that have a 1:4 risk:reward ratio, we can win only ONE time (gain $1.85) and lose FOUR times (lose $0.46 four times), win only 20% of our trades, and do no worse than a break even. It isn't likely that we'll win only 20% of our trades if we're being disciplined about following patterns and employing proper stops, but that dramatic example illustrates the value and importance of managing risk, and of structuring trades that are stacked in our favor. I view it as a business deal that should executed in an unemotional, disciplined, business-like manner. But, like everyone else, I forget to DO THAT, and get sloppy with my trading. LOL.



The trade went well. When the 97.30 target got MADE, I hit the "sell buzzer" (LOL) on a market order. Goldman was pumping higher, so I did a little better than the 97.30 target, selling into strength.

NOTE: If I had used the 97.25 high to establish the target, that would have put 97.50 IN PLAY, which also MADE, but as I said, I prefer to be conservative about establishing targets.

Happy Valentine's Day to everyone!

XOM: Broken Wedge - Broken Triangle

When we last looked at XOM on January 25, it was trading inside the Symmetrical triangle (pattern in red), not doing much of anything. Since then, XOM completed and broke below a Bearish Rising Wedge (pattern in purple) on February 10, then broke and closed below the Symmetrical Triangle on February 11.

Yesterday, XOM put in a low of 72.70, two cents above the December 5 low of 72.68. That 72.68 low was a trendline validation (Blue #5) prior to the run-up to the Fakeout/Breakout high of 83.64, which validated the trendline at the top of the pattern as resistance. That 72.68 low also was the beginning of another validated trendline, the bottom of the Symmetrical Triangle, which was broken on February 11, so that particular data point (72.68) would appear to be pivotal.

XOM closed yesterday's session back above the bottom of the broken Symmetrical Triangle, which always is a pain in the neck because it calls the breakdown into question, but it didn't do it by very much. A couple of pennies. Notice, however, what a pain in the neck shorting the December 19 breakdown of the Bearish Rising Wedge (pattern in blue) has been for anyone holding it for the past two months. UGH.

Still, I'm considering a short position in XOM, especially if it makes a bid for the bottom of the second broken Bearish Rising Wedge (pattern in purple), which comes in today, February 13, at 77.01.



A bullish case for XOM is that it's forming a Bullish Inverse H&S pattern with a rather severe upward sloping neckline. That doesn't seem likely, but that case improves if XOM goes barnstorming higher, and knocks out the recent high of 80.50.

Bears need to take down 72.68-72.70 support.