Welcome to Bravechart. Your in-depth article on chart analysis from a Scotsman stationed in the Outback.
As traders, we use technical analysis as a reliable method for speculating on future price direction of both equities (shares) and indexes. Technical Analysis in simple terms is the study of historic price movements in a chart in search of patterns or consistently traded support and resistance levels. Today we are looking at a specific chart pattern that falls under continuation patterns, the Descending Triangle.
Appearance: A Descending Triangle pattern is comprised of:
- A down trending stock that has lower peaks and troughs.
- A support level where the stock is channeling towards.
- Both trend lines create a triangle forming in the bottom right of your chart.
Important Note: Be aware, this pattern will not be confirmed until the share price breaks through the support level and continues the downtrend.
Example: Computer Share Limited (CPU)
CPU seems to be in the very point of a descending triangle, with the share price being forced lower and lower. Today’s move higher however, is now on the very edge of the downtrend line and looks like we may see a breakout either to the downside or the upside in the next couple of days. If CPU breaks to the downside, we will expect to see the next support at $16.75. As this stock is long term up trending, we may see a break to the upside, and a move in the medium to long term on the range of $19.50 to $21.00.
There are many ways that you could take advantage of these patterns. As a specialist in derivatives, we are able to profit on a stock when it falls as well as when it rises.
If you would like to learn how to pick a stocks direction, then Join us at our live face to face one day “Technical Analysis, Picking the Direction of a Stock” course.
Contact us today on 03 8080 5788.
Regards,
Benjamin Farkas
TradersCircle