Pattern Trading

bvpraveen · #**161** 4th February 2007, 11:46 PM

Quote:

Originally Posted by kkseal

First of all breakouts from descending triangles are usually down rather than up.
Also if you draw a line connecting the first two pivot highs you'll get a smaller desc triangle with two failed breakout (up) attempts. But each time the stk has managed to bounce back from the strong support it has around 500 lvls.

I think in such a scenario one should wait for a cross of the last swing high (i.e. the highest point of the triangle) or at least a higher high to be absolutely sure.

Regards,
Kalyan.

Hello Kalyan,

As you'd said, descending triangle mostly results in breakdowns, but at times they breakout too. Of course its probability is less. In this case since the previous price trend was uptrend, IMHO I think its a consolidation pattern. So this descending triangle breakout might be a consolidation pattern. Just my two cents.

Thanks for the pointing out that the inner noise is a kind of another pattern. I overlooked it.

Regards,
Praveen.

kkseal · #**162** 5th February 2007, 12:05 AM

Quote:

Originally Posted by bvpraveen

Hello Kalyan,

As you'd said, descending triangle mostly results in breakdowns, but at times they breakout too. Of course its probability is less. In this case since the previous price trend was uptrend, IMHO I think its a consolidation pattern. So this descending triangle breakout might be a consolidation pattern. Just my two cents.

Thanks for the pointing out that the inner noise is a kind of another pattern. I overlooked it.

Regards,
Praveen.

Right Praveen and in the course of the last upmove it broke above that strong resistance zone around 500 (after 3 prior attempts) on v good volumes. This will now act as a strong support (& is also what makes me optimistic

)

In fact the first thing that struck me about that chart was not the triangle but the strong support it has built up around the 500 lvl (it is also the apex zone of the triangle). If that lvl holds and the stock makes a higher high in the next few days, one can be pretty sure of a good upmove.

Regards,
Kalyan.

bvpraveen · #**163** 5th February 2007, 10:21 AM

Quote:

Originally Posted by kkseal

Right Praveen and in the course of the last upmove it broke above that strong resistance zone around 500 (after 3 prior attempts) on v good volumes. This will now act as a strong support (& is also what makes me optimistic

)

In fact the first thing that struck me about that chart was not the triangle but the strong support it has built up around the 500 lvl (it is also the apex zone of the triangle). If that lvl holds and the stock makes a higher high in the next few days, one can be pretty sure of a good upmove.

Regards,
Kalyan.

Hello Kalyan,

Thanks for your comments. Lets see what happens to REL.

BTW although I can understand the logic behind higher pivot highs, uptrend, etc., in case of breakout from descending triangle, do we need to wait for higher high to be formed? As a matter of fact, this applies to any patterns. IMHO I don't think so. Of course the higher pivot high can be a confirmation for the uptrend. But do we need to wait for it to be formed in case of breakout from patterns? Thats my point.

Regards,
Praveen.

kkseal · #**164** 5th February 2007, 01:54 PM

Quote:

Originally Posted by bvpraveen

BTW although I can understand the logic behind higher pivot highs, uptrend, etc., in case of breakout from descending triangle, do we need to wait for higher high to be formed? As a matter of fact, this applies to any patterns. IMHO I don't think so. Of course the higher pivot high can be a confirmation for the uptrend. But do we need to wait for it to be formed in case of breakout from patterns? Thats my point.

Regards,
Praveen.

Hi Praveen,

It's always a pleasure discussing things with you. Like your eye for detail

For me the triangle is no longer the deciding factor. In fact after the 2 unsuccessful upside breakout attempts i'd say it's no longer valid as prices are now outside the triangle zone (the last bounce was from it's apex area).

Also from the Price-Vol pattern it'd seem that people who wanted to sell at arnd 500 lvls have already done so and the stock should now be in the hands of people who've bought around that lvl (apart from longer term investors).
However the descending triangle is evidence of the fact that some supply pressure may still be around. Once we're above that triangle zone one can be pretty certain that demand is ruling over supply. Also traders who sold at 500 lvls will scramble back in once they see a new high being made, thereby adding momentum to the upmove.

The moot point about that higher high is to see whether the demand persists (or just peters out). However one can buy the stock even now, but this will obviously depend on the buyer's risk appettite (and in this case there can be no doubt as to where the Stop Loss should be

)

Regards,
Kalyan.

bvpraveen · #**165** 5th February 2007, 02:44 PM

Quote:

Originally Posted by kkseal

.....
Also from the Price-Vol pattern it'd seem that people who wanted to sell at arnd 500 lvls have already done so and the stock should now be in the hands of people who've bought around that lvl (apart from longer term investors).
.....

Hello Kalyan,

Thanks for your detailed explanation.

Can you please elaborate why you feel that all sell has been done at 500 level. I couldn't get the picture from the price-volume pattern.

I would be glad if you can explain it.

Thanks,
Praveen.

kkseal · #**166** 5th February 2007, 03:17 PM

Quote:

Originally Posted by bvpraveen

.

Can you please elaborate why you feel that all sell has been done at 500 level.

See how many times that level has been 'hit' from mid-August till mid-November (on high volumes) before the long-bar cross-over (not to mention the subsequent distribution within a narrow(ing) range above this lvl, as symbolized by the descending triangle). This i think ought to be enough to take out the short-term supply (unless some long-term buyers, funds etc are also distributing. Hence the need for confirmation of the continuation of demand).

Regards,
Kalyan.

bvpraveen · #**167** 5th February 2007, 04:39 PM

Quote:

Originally Posted by kkseal

See how many times that level has been 'hit' from mid-August till mid-November (on high volumes) before the long-bar cross-over (not to mention the subsequent distribution within a narrow(ing) range above this lvl, as symbolized by the descending triangle). This i think ought to be enough to take out the short-term supply (unless some long-term buyers, funds etc are also distributing. Hence the need for confirmation of the continuation of demand).

Regards,
Kalyan.

Hello Kalyan,

Thank you very much for your detailed explanation. Learnt a lot of key points from you.

Meanwhile that Rs.500 level support/resistance is awesome. Just see how many times it has been tested since Nov. 2003. Even for the past three months alone it has been tested 6 times! Excellent example for support/resistance.

Thanks once again.
Praveen.

bvpraveen · #**168** 5th February 2007, 04:54 PM

Hello all,

As we'd previously discussed about volume in HDFC breakout, I need one more clarification.

When we look for volume confirmation in case of breakout in daily charts, is it enough if we look for such confirmation in daily charts alone? Or as Joy had told do we need to look out for lower time frames(hourly, 5min, tick data, etc) in every instance of breakout?

Secondly, in case of high volume confirmation, should the volume distribution be some what even(say for eg. somewhat increasing volume for last 3-4 bars in hourly chart, when we look for breakouts in daily charts). Because if we look at some charts which has given breakouts, if we try to see them in lower time frames, the volume is very high for just one bar.

For eg. look at the attached REL 3min chart (I don't have infrastructure to get tick data chart).

Regards,
Praveen.

J_D · #**169** 5th February 2007, 07:13 PM

Hello Friends,

The daily Chart of Cranes Software indicates a likely Breakout candidate. Can anyone comment on this. Is my assumption right? I am learning about interpreting charts with the good discussion going on here.

John.

bvpraveen · #**170** 5th February 2007, 07:31 PM

Quote:

Originally Posted by J_D

Hello Friends,

The daily Chart of Cranes Software indicates a likely Breakout candidate. Can anyone comment on this. Is my assumption right? I am learning about interpreting charts with the good discussion going on here.

John.

Just my two cents:

Its in trading range. Lots of resistance to be crossed before it can begin its uptrend.

Praveen.

Similar Threads for: Pattern Trading
Thread	Thread Starter	Forum	Replies	Last Post
Trading With Chart Pattern	soumya_b	Technical Analysis	214	13th December 2008 05:25 PM
The Head and Shoulders Pattern	Traderji	Technical Analysis	11	1st November 2007 06:53 PM
NTPC Chart Pattern	gcvikranth	Trading on Technicals	4	27th November 2006 09:09 PM
Gold intraday pattern	CageRattler	Metals	0	30th October 2006 02:57 PM