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by Gary Grosschadl
Even bearish formations are tradeable as this weekly chart shows via a descending triangle.
Position: N/A
Gary Grosschadl
Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.
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DESCENDING TRIANGLES
Trading Opportunities in Triangles
10/15/02 10:39:34 AMby Gary Grosschadl
Even bearish formations are tradeable as this weekly chart shows via a descending triangle.
Position: N/A
| Universal Display Corp. has been a volatile trader since its big breakout move in late 1999. Now you can see a multi-year pattern in the form of a bearish descending triangle. Those that spotted this pattern had the opportunity to make two exceptional trades - a short in early summer and a recent long position three weeks ago, as shown on chart. |
| The shorting opportunity came at the upper trendline touch where the candlesticks were dubious with their long upper shadows (tails) while short-term stochastics and longer term CCI (commodity channel index) both flashed overbought signals. The patient shorter was handsomely rewarded with a short at $10 and a cover around $5 over 10 weeks. |
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| Graphic provided by: stockcharts.com. |
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| The next good opportunity came a few weeks ago for traders looking to go long. The stock did a basing period for two months and observant traders would have noted that the previous big hammer candle from late 2000 marked a good lower trendline. Also note how the short-term MACD indicator did show a bullish divergence (it did not set a new low with the stock price), hinting at a coming upleg. |
| So where do we stand now? It's likely too dangerous to go long now (unless you are very aggressive and switch to a daily chart) as it looks like a stall zone is approaching. Note the very high stochastic indicator and the resistance level marked near the $8 level (previous support likely future resistance). |
| The more prudent action would be to wait for the reversal that may very soon materialize forcing the stock back down to the $5 zone. Since this is a bearish formation, traders should also watch for any eventual weakness below $5 as this could attract shorters and you may be able to profit with them. The lesson here is that large triangle formations are very tradeable even from a weekly perspective. |
Independent Canadian equities trader and technical analyst based in Peterborough
Ontario, Canada.
| Website: | www.whatsonsale.ca/financial.html |
| E-mail address: | gwg7@sympatico.ca |
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Date: 10/15/02Rank: 4Comment:
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