We last looked at AEM on February 25, the morning after it broke down below the BLUE Symmetrical Triangle. Notice that the 44.12 target did not get MADE. The low was only 44.66, which was fairly close given that the breakdown occurred at about 51.60, but the full measured move target of 41.94 target didn't come close at all. Targets don't always get MADE.
Instead of continuing to the downside, AEM went into the second Symmetrical Triangle (in black). After AEM put in Black Data Point #4, we now have the parameters of the Symmetrical Triangle, and we look for a breakout in either direction.
On St. Paddy's Day, the 89/144RSIs came into Bullish Synchronicity, meaning that the readings were very close, and that the 89RSI came back to "kiss" the slower 144RSI. That candle, circled in green, was a Doji Star "indecision" candle, and it was a "pivot" candle, meaning that if the 48.83 high gets taken out to the upside in the next session with a print of 48.84, the decision is made. That's a technical buy signal based on that particular indicator. It's up to the technical analyst to look at the chart and to make a determination whether or not to take the signal.
If I had been watching AEM on March 18 when it printed the 48.84 Buy Signal (I wasn't), I would have taken it given that the parameters of the Symmetrial Triangle were in place. Stop: 46.21, the low of March 18 before the Buy signal was given. Once the Buy Signal is given, that low "shouldn't" get taken down.
After the Buy Signal was issued, AEM took out the top of the Symmetrical Triangle at 50.06, which put a target of 57.40 IN PLAY. AEM had a big move on March 18 off that technical breakout.
Math for the Symmetrical Triangle:
52.00 - High of the pattern
44.66 - Low of the pattern
52.00-44.66 = 7.34 points of upside on a breakout at 50.06 = Target: 57.40 IN PLAY.
That target got MADE in Monday's session.
By the way, notice that BLUE #5, on February 23, was a trendline validation at the top of the BLUE Symmetrical Triangle. Those give a strong suggestion that we "should" get some decent downside if the pattern breaks down, which it did. Again, the final target didn't get MADE, but AEM had a decent selloff.
7 comments:
Melf,
I notice that you use many different RSI. Are these simply data points that you view for confluence or do the longer periods have a specific application?
Melf,
I know you have your favorite companies to follow. You may want to look at CLF. To my untutored eye, I see a rounded bottom perhaps morphing into a cup and handle on the daily. My gut tells me this will have some legs. Since you have been so generous sharing your knowledge, I thought I would try to share with you.
Good Morning, Mark,
I look at the Fibonacci 8 through 244 RSI's to see what occurs after they thrust higher (bullish) or lower (bearish). When they come back into what I call "synchronicity," i.e. readings that are very close, that often seems to act as a sort of compression for a spring higher or lower at "synchronicity."
If the faster RSI continues through the lower one, there's no signal. But, if price can take out the prior day's high at bullish synchronicity, or the prior day's low at bearish synchronicity, the move in the stock often continues in the initial direction, especially if the is a pattern in place, like today's example in AEM.
The BLACK Symmetrical Triangle parameters were in place, and on St. Paddy's Day, the 89/14RSI's were at Bullish Synchronicity. On March 18, when AEM printed 48.84, above the St. Paddy's Day high ... BANG! AEM broke out of the pattern, and had a very nice gain on the day.
Those signals don't always result in that kind of move, nor do they always work. Just a tool that I like to use.
Thanks for the mention of CLF. That's a Double Bottom that you're looking at. If you're interested:
1. See if you can identify the two lows of the Double Bottom.
2. See if you can identify the middle of the "W" of the pattern. A "W"-Bottom is synonymous with "Double Bottom."
3. See if you can identify the target that is IN PLAY, once the middle of the "W" got taken out.
Don't feel that you have to do that, but sometimes we remember things better if we discover it ourselves ;)
If you can't find it, I'll show it to you for general learning purposes for anyone reading the blog.
NOTE TO READERS: That doesn't mean that I'm going to do "stocks by request" in the future ;)
Okay, just to show you I do my homework assignments, here are my answers: double bottom on daily 11.41+11.47; middle of W 15.01; target = 11.45+(15.01-11.45) or 18.56.
I'll look for your comments to see how I've done. Thanks for your instruction.
I also looked at the 2min. chart and came up with 17.72 as the double bottom ;18.18 as the middle W and the target as 18.63 (17.72+(18.18-17.72)) =18.63
Hi Melf,
I just found your blog recently and let me give my compliments on a most excellent blog! I'm trying to learn all I can about TA and I'm so thankful for people like you who generously provide so much information.
These multiple RSI signals are very interesting, you mentioned them in a post about SKF not too long ago. In this example you had only 2 RSI's at synchronicity (89 and 144) which surprised me, I expected that you would want to see more than that. Obviously the more the better, but have you found that 2 can be enough to trade off of? I'll hold off on any more questions until I've had time to backtest them.
Mark,
Good boy! You get a "A" for doing your homework and can go to the head of the class. LOL.
Your calculation is essentially correct (off by a penny...no big deal), but all of your data, including your second response using the 17.72 and 18.18 are incorrect, which isn't your fault.
I download my data from Reuters and I double checked with the Scottrade chart and my numbers all agree.
The lows of the Double Bottom are 11.84 and 11.80, not the 11.41 and 11.47 that you got. That disparity can make a difference when calculating a target.
In your second post, your 11.72 actually is 11.73. Your 18.18 actually is 18.20. Those aren't off by much, but you're getting incorrect data, as far as I can tell.
Good job, though!
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Hi, David,
Welcome!
I haven't come up with anything definitive on the RSIs, and I don't think that I ever will. For example, the MACD going above the zero line often is a good signal, but it isn't ALWAYS a buy. Much depends on what the chart looks like, and that's the case with these RSIs.
I find that they seem to work well when there's a discernible pattern, and as you say, "the more the better." I could drool just thinking about those back-to-back Across The Board RSI signals in the SKF that you mentioned (the first one was a buy; the second one was a sell). Why that worked so well, I haven't a clue, but then I don't have a clue when any of the fibonacci stuff works, but it often does, huh?!
Yes, if I like the chart well enough, just one pairing of the sequential fibonacci RSIs issuing a buy or sell signal is good enough for me to act on it.
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