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ASCENDING TRIANGLES


Mitsubishi Tokyo Financial Forms Bullish Continuation Pattern

03/11/05 09:08:22 AM
by Arthur Hill

After a big run in 2004, Mitsubishi Tokyo Financial consolidated for several months and looks poised to continue higher.

Security:   MTF
Position:   Accumulate

The current pattern at work for Mitsubishi Tokyo Financial (MTF) is an ascending triangle. These are bullish continuation patterns that occur after an advance and foreshadow a continuation of that advance. As with most patterns, some sort of confirmation is required, and this comes in the form of a resistance breakout.

The pattern reflects both increasing demand and overhead supply. The green arrows show a series of higher lows. These higher lows formed because buyers came in at higher prices and prevented prices from moving below the prior low. This shows increasing demand.

Figure 1: Mitsubishi Tokyo Financial. The pattern reflects both increasing demand and overhead supply. The green arrows show a series of higher lows. Even though demand is increasing, there is overhead supply around 10.5 (red arrows).
Graphic provided by: MetaStock.
Graphic provided by: Reuters Data.
 
Resistance marks overhead supply. Even though demand is increasing, there is overhead supply around 10.5 (red arrows). The stock tried to punch through this resistance level and failed each time. A move through 10.5 would signal a victory over supply and argue for further strength.

The upside target would be to around 14. The length of the pattern is added to the breakout for a projection (~10.5 - ~7 = 3.5, 10.5 + 3.5 = 14). The stock is currently trading near support and needs to hold the lower trendline to keep the pattern alive. A move below this trendline and the December low would negate the pattern and the bullish forecast.



Arthur Hill

Arthur Hill is currently editor of TDTrader.com, a website specializing in trading strategies, sector/industry specific breadth stats and overall technical analysis. He passed the Society of Technical Analysts (STA London) diploma exam with distinction is a Certified Financial Technician (CFTe). Prior to TD Trader, he was the Chief Technical Analyst for Stockcharts.com and the main contributor to the ChartSchool.

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