After five bearish patterns emerged in the chart, and subsequently broke down, the FAZ put in a Bull Flag and broke out of it late in the session. Volume dried up a bit during the pattern formation, then increased on the pattern breakout that put roughly 39.00 IN PLAY. The FAZ did much better than that, and rallied to 42.68 horizontal resistance at the top of the second H&S Top, in blue.
That resistance is the horizontal yellow line in this chart. Next resistance is the 44.90 high of the first H&S Top, represented by the solid white line.
Above that, next resistance is the nested Symmetrical Triangles, in yellow and red. Notice that the yellow pattern broke down, but then rallied and "morphed," or changed, into the larger red triangle. As we've seen so often, those nested patterns can pack some punch when they break down, as this one did. Also notice that after the breakdown of the red triangle, the FAZ tried to claw its way back inside the pattern, but to no avail. It was resistance, and when the FAZ got going on the downside, longs who didn't sell were trapped inside the pattern.
If the FAZ now can do something like rally to 44.90 to form a neckline, pull back to something above 38.00, which would be the low of the Left Shoulder, then knock out the 44.90ish neckline, that would put roughly 55.00 IN PLAY.
44.90 - Neckline
34.80 - Low of the Head
44.90-34.80 = 10.10 points of upside on a breakout + 44.90 = Target: 55.00 IN PLAY
All of that is getting ahead of ourselves, though. I don't predict anything. I try to follow the market, as best I can, like the eight patterns on these two charts. The first seven patterns told us that the FAZ still was bearish. The eighth pattern told us that the very short-term trend turned bullish when the Bull Flag broke out, and when the 39.00 target got MADE, and exceeded.
Hats off to Susannah for sniffing out an impending top in Morgan!
After our discussion at the weekend in the "Morgan: Topping Example," picture me sitting here watching this DOUBLE H&S Top unfold. LOL.
The first one broke down and put 23.92 IN PLAY. The larger one in white broke down and put 22.00 IN PLAY. The horizontal red lines are the highs of the Right Shoulders. Many players will use those as their "buy to cover" stops on a short position because in a H&S pattern, the high of the Right Shoulder "shouldn't" get taken out to the upside once the pattern breaks down. When the second H&S pattern breaks down, the stop can be moved down to the high of that Right Shoulder. On any rally from here to retest the broken neckline (23.98-24.15), that Right Shoulder high (24.91) "shouldn't" get taken out.
Happy St. Paddy's Day, everyone!
2 comments:
I like it when fundamental analysis and technical analysis come together :)
Have you ever taken a look at zstock.com? He does technical analysis mostly with indicators, not patterns, and evaluates the P/E ratio historically for the stock, it all comes together very well.
So many different techniques, it's very interesting to learn about them all.
Susannah,
Yes, I looked at zstock's site in February when he made a call for a selloff in the GDX. He was right on the money.
Hey, nice job on Morgan! Speaking of different techniques, Morgan came pretty close on Monday to the bottom of the Kumo (Cloud) resistance in the Ichimoku Kinko Hyo chart before putting in the Double Top. The bottom of the Kumo was 26.4175. The high was 26.25.
It all is very interesting, as you say.
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