Mark,
Your analysis lacks a few things:
1. Context
2. Accuracy
But does contain:
1. Poor terminology
2. Dangerous statements (for beginners)
If this is to be a thread for ‘First Steps’ then it is essential that the process of reading a chart is followed from the basics through to the current situation and an assessment made of the price action, covering all the time frames downwards, identifying the overall state of the chart and what we would expect to be the major and minor trends, support and resistance areas, coupled with the chart patterns themselves.
You must start the chart analysis at least from the start of the previous major trend; in some cases this may mean going back to 10-year charts.
BAE
Start with the longterm chart:
This gives us the overall view of the current major trend of the market, the context of the recent price action within the bigger picture and highlights any major chart patterns and support/resistance levels that should be noted.
If you are looking for triangles, try that one as a continuation breakdown, it broke a bit early, but nailed the 100 level as a target.
Moving the time frame in a bit:
This 5 year chart highlights the support and resistance areas better, and still manages to include the top of the price action and the major down trend. It also shows just how fast the stock broke down, accelerating away from the major trend. Please also note the very fast descending triangle as the “ooh it’s cheap” mob held to price after the drop through 275.
Here we have the 2 year chart, plenty of nice breaks to the downside with minor recovery trends, these levels now provide the support and resistance levels as we go forward.
Finally (in this case – if you were trading intra day you would need to continue down to your time frame), the one year chart:
Here we can get some detail of the current recovery trend. 135 became a huge resistance level in the chart once the price action had settled down from the drops. As we entered a period of higher lows an ascending triangle pattern emerged with 135 as the break point. The pattern completed and is an almost perfect example of the patter, hitting its target at 170. There is no other triangle pattern here at the moment. The accelerated 3rd phase trend has broken, the 2nd phase ‘normal’ trend is still in force. The price action is in a consolidation phase which is well bounded by 195 at the top and 165 at the bottom. For the short term trader these levels may provide trading points, for the longer term holder the break of trend (currently also at 165) is the important decision point, although a break above 195 may be an opportunity to add to existing positions if it takes your fancy.
Your analysis:
Yes there is support at 160, but there is more immediate support at 166 (the red line on the chart) The support and resistance points don’t need as many touches as trendlines, so the ones we have identified are important.
The trendline I have drawn in needs another bounce off that to make the ascending triangle complete.
What ascending triangle? There isn’t one. Your ‘trendline’ is plucked out of thin air and comments about ‘touches’ is very odd!
Barclays
A horrible chart – potential for a massive 5 year H&S should the base support at 300 be broken – with a target of 0!
However, a band of key resistance levels acting as a sort of pivot to the price action (do not confuse this with pivot points!) sitting between 480 and 520, fairly clear water to the upside up to 580.
A 2 year chart, getting a better handle on the support/resistance levels and chart aptterns as the market fell over/recovered. Eventually a reasonable H&S reversal back through 400 defining the current bottom of the market. The long term bear trend has also been broken and a fairly strong bull trend has followed, moving through support, retesting and then moving on again.
A better view of the trend, some ‘scary’ moments where the trend and support have come under pressure – 435, 455 – but the price action has managed to hold both trend and support. Above the price action a return line is being established. Ideally this should be parallel to the trend, in this case is is squeezing the price action slightly, never-the-less becoming well established.
In conclusion, a good trend, working its way up the ladder of support and resistance. However, it has reached the top of the major resistance levels found in the longer term charts, so worth keeping an eye on should it fail to continue to break to new highs within the trend. There are no obvious chart patterns as such.
Your analysis:
There is a reason why you can’t see a triangle, there isn’t one on this chart
The thing to notice was the 2 trendlines, one over the high’s and the one connecting the lows. Yes it could be called an expanding triangle, but I don’t think the trendlines are going away from each other fast enough.
For a short trade I would be looking to have a stop-loss at 527 and a target of the lower trendline. As I mentioned earlier, the problem with this type of pattern is that the risk increases as the days / bars go by.
Correct, no triangle. But why are you talking about 2 trendlines, the top line is a return line, please don’t call it a trendline otherwise people new to this will start drawing ‘trends’ over the price action! There is no chart pattern it is a straight trend, and again your ‘trendline’ cannot be correct as it does not include the lows, they must be included, or the trendline justified by saying why it doesn’t include the lows.
Centrica
Long term chart:
A great over view of the price action with a huge descending triangle formation which failed to make target by c 10 points. The overall bear trend is still intact and the price action is currently stuck against the previous base around 195.
A closer view of the breakdown and the subsequent fast 3rd phase trend. From this picture we can see how the price action is reaching critical levels in terms of potential breakouts and the completion of a large H&S reversal through the old support levels 190/200.
As we ‘zoom in’ to the price action, some of the smaller chart patterns become more obvious, a couple of sets of descending triangles, the importance of the 170/175 level becomes apparent as the neckline of the recovery H&S.
Getting right into the recovery phase we can pick out how the trend has developed, straightforward areas of consolidation, before a further move higher. These are not defined triangles; they are the standard ebb and flow of the market. This is a simple case of trend, support & resistance interacting, if anything the continuation patterns resemble rectangles more than anything else – should you feel the need to try and define them.
Currently the price action has run out of steam, not a surprise considering that it has reached the breakdown point from the longer term charts, the trend has been broken and the price is bounded by 195/185.
Your analysis:
Eek, I can’t believe I said long on this chart I would have a very tight stop at 184 and take any profits sooner rather than latter. Not a nice chart that one
The chart is fine, it has been a good run up from the lows, hitting the H&S target, but again, your ‘trendline’ is worthless, all you have done is join some lows together with no regard for the full trend from the lows.
Cable & Wireless
Ah, nothing like a failed telecom stock to raise the blood pressure of private investors!
Disaster area, but great TA. Tremendous descending triangle from the tops giving a target of 50 – and it basically made it! The chart was basically like a stepladder all the way down, breaking support and never threatening to break above resistance.
This is one of the few occasions where a new trendline can be justifiably drawn as the price action is moving downwards. The break through 700 was so severe that the following trend could be mapped separately – however, that does not excuse losing sight of the longer term trend.
A nice couple of continuation patterns – descending triangle and Head & Shoulders.
Getting closer in we can see how the break downs have continued until we eventually get to the point where the price action moves sideways enough to break the immediate trendline in April and we can tentatively draw in a base trend.
The break above 110 is particularly significant as it is the first break of resistance since the peak – some £14.00 ago. It also confirms the recovery trend.
No triangles, no chart patterns, just a steady up trend which is starting to gather some pace as investors come back into the stock.
Still has some major hurdles to overcome; immediate support is at 130 and (more importantly) 110. To the upside resistance at 155/160 is where the hard work really begins.
Your analysis:
Yet again, Superb Yes the height of the triangle added to the break-out point does give the first target for the move, but I have to be honest and say I’ve yet to get any of them to work
What triangle? Because you have decided to write about them, you are seeing them everywhere, this is a simple case of a trend starting off and breaking some resistance for confirmation, don’t look for things that aren’t there! Chart patterns are in reality rare enough without trying to label every bit of price action.
Glaxo
This looks like a Chinese guard report – however, you can see how the trendline accelerated on the way up, and on the way down. There is an almighty double top still sitting there with a target of 600.
Coming in a bit closer, we can see a few of the chart patterns emerge, descending triangles and a nice continuation flag/rectangle. 1000 is providing the psychological support holding the base of the current price action and 1400 is the critical overhead resistance. Note how even by looking at this 3 year chart you may not have realised the importance of 1400 as a level. For GSK to shake off the spectre of the double top, it needs to regain the 1400 level.
Please also note, that in reality we are faced with a stock that is in a very well defined range, very different from the previous charts where the recovery in the markets has helped push them quite a way from their lows and into some form of recovery.
Here we can see a descending triangle that failed, the price kept pushing hard against the 1100 level, but failed to crack the 1000.
More amplification of the range, the H&S recovery has failed, the H&S to the downside has also failed. The recovery trend is broken, there is no chart pattern here, just a damn awful range, great for writing options, not so great for anything else – until it breaks either through 1400 or 1000 there are much better opportunities out there.
Your analysis:
The one thing to notice is that the price is getting very close to the apex of the triangle, which is slightly worrying as they are supposed to break ¾ of the way along
Again, no triangle, again trend not taken from the lows, if so you would be aware that it has already been broken and this stock is in a horrible range.
You may think I am being harsh – I am, this isn’t a nice business. If you are seriously considering putting a document together then you really need to sort your analysis out because you are ignoring the basics of even picking up a chart. At the moment you are more likely to, unwittingly and with the best intentions, lead someone up the garden path.
