On July 15, NEM had a Breakaway Gap out of the Falling Wedge (pattern in black), and closed at 40.45. Technicians often will use the top of the Wedge as the target, then a measured move off the breakout (high - low of the pattern, added to the breakout point).
As I've often said, I don't find wedges to be very reliable. I use the "last high" in the wedge as my first target, which in this case is 43.36. So far, NEM hasn't gotten there and at yesterday's close of 39.88, it's below the bullish Breakaway Gap close of 40.45 on July 15. Six weeks later, it's not looking very bullish.
After the Falling Wedge breakout, NEM put in an Ascending Triangle (pattern in blue), with the relative flat highs of 42.71 - 42.83, below the 43.36 target. On August 11, NEM violated the bottom of that pattern, but hung on and closed just three and a half pennies above it. The next session opened below the pattern, but NEM managed a close back inside it.
August 13, NEM made another another move toward the top of the Ascending triangle, but at that close, ALL of the Fibonacci sequential measures of relaative strength were at Bearish Synchronicity, so that candle became a "pivot candle." That meant that a downside takeout of that day's low of 40.84 in the next session was an Across The Board Sell Signal in the RSIs (the red "ATB" on the chart).
August 14, NEM not only printed 40.83, which was the actual Sell Signal from all of those indicators, it closed at 40.63, two pennies below the lower trendline, which came in that day at 40.65. The next session was a Gap Down, which put the 38.71 low at Blue #3 IN PLAY. The target got MADE in a single session. The low of the Gap Down candle was 38.70. NEM put in a low at 38.53 two sessions later, then began a rally.
"Retests of breakdowns are common, and are to be expected." NEM also had that gap to fill. NEM rallied back to the bottom of the Ascending Triangle, filling the gap, and failed just below the trendline.
Across The Board Buy/Sell signals are rare, so I'm particularly interested to see how this plays out. The 38.71 target got MADE, so that could be it on the downside. NEM also could make another bid for the bottom of the Ascending Triangle on an A-B-C rally (the next rally leg would be "C"), but as the chart stands, Ms. Market is telling us that it's bearish, given the Ascending Triangle breakdown, and the failed retest of the breakdown.
3 comments:
Good Morning,
I have a basic question that often plagues me. On your blue bottom trend line #1&3 the first points are drawn at the lows of the shadows but when you extend, the line continues through the body of next touch. Could or should there be a slope change to accommodate the third touch? Does it matter that much to be quite so precise? I would feel stupid developing a strategy based on faulty input as I feel stupid asking about how to draw a straight line.
Good Morning, Mark,
It matters to me to be that precise because I want to know if a trendline has any significance, or not. In other words, is Ms. Market telling us valuable information, or have we just connected two data points that, ultimately, is totally meaningless?
Regarding the Blue Bottom trendline #1-#3, remember that Ms. Market told us:
1. August 11 - "I have violated the trendline, which was 40.165, but I CLOSED the session at 40.20, three and a half pennies ABOVE the trendline."
That's a "trader's choice," Mark. Some traders will sell any trendline violation. Some will hold if a stock doesn't CLOSE above or below a trendline.
That CLOSE certainly had "some" significance, so we'll let it alone, and see if Ms. Market gives us any more information about its significance, or lack thereof.
2. On August 14, the trendline was at 40.65. NEM closed at 40.63, just two pennies BELOW the trendline.
Did the action in the next session look like that two cent CLOSING violation have any significance?
Yep. Gap Down, and the 38.71 target got MADE.
3. August 24 - the trendline was at 41.62. The high on the session was 41.49, thirteen cents below it. The trendline doesn't "have to" get tagged in order for it to be a failed retest. Players are anxious to short the expected failure, so they step in a little early, to make sure that they gat filled.
So, with this particular trendline, we got THREE bits of information that it had some significance.
We can't expect exactitude, Mark, or perfection out of these things. The key is, "Did we learn anything from a trendline retest?" If price goes above and below and above and below and above and below a trendline, like the top trendline of the putative Broadening Top in the SPX that we looked at last week, it's unreliable and useless to us.
Sorry that this explanation is so long. There just aren't any hard and fast rules about these things, which I know you would like.
So would I ;)
Thanks. Helpful as always
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