Welcome to Bravechart. Your in-depth article on chart analysis from a Scotsman stationed in the Outback.
A potential Evening star pattern on Flight Centre Travel Group Ltd (FLT)
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 reversal patterns, the Evening Star.
Appearance: An Evening Star is comprised of:
- As strong bullish day where the open is near the bottom of the day’s trading range, and the close is near the high of the day’s trading range.
- The bullish day is followed by a Tombstone Doji which has both the open and close at the bottom of the day’s trading range.
- The Tombstone Doji is followed by a strong bearish day where the open is near the high of the day’s trading range, and the close is near the low of the day’s trading range.
Bearish Reversal Pattern: The Evening star is one of the most reliable bearish reversal patterns. You can see the price moves higher, is followed by a strong retracement, and then is confirmed by selling. The stock should continue lower once the pattern is complete.
Important Note: Be aware, this pattern is much more reliable when it occurs following a strong rally in the stock and/or is near the top of a trading range, key levels of resistance. It is less reliable if the stock has recently been falling.
Example: Flight Centre
Flight Centre has been in a long-term uptrend that has been going strong since January of this year. The stock recently has had a bullsih push recently and formed two Morning Star Doji’s. If tomorrow we see the reversal and a strong bearish day, we may see a reversal of the share price and a fall back to the long-term trend line. Below you will see a chart of FLT and how the last two trading days have caused Tombstone Doji’s to form.
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.
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