Welcome to Bravechart. Your in-depth article on chart analysis from a Scotsman stationed in the Outback.
Descending Triangle Pattern on Wesfarmers Ltd (WES)
As traders, we use technincal analysis as a reliable method for speculating on future price direction of both equities (shares) and indexes. Technical Anyalysis in simple terms is the study of historic price movements in a chart in search of patterns or consistantly 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: Wesfarmers Ltd (WES)
Wesfarmers has been in a downtrend for the three months, as seen below. The share price has fallen continually over this period, but possibly bounced off a support level back in December of 2017, which the share price has recently held as well. Today we have seen a strong bullish move higher, one that is now starting to test out the downtrend support line. If the share price breaks out of this descending pennant, we could see the share price of WES head back to resistance at $48.50. The breakout of the downtrend will have to be confirmed before we see a reversal of the descending triangle.
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.
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Regards,
Benjamin Farkas
TradersCircle