Forum Archive Index - February 2002

["andrew cottingham" <arco@adinfinitum.co.nz>]

Adam

 

PHY formed a Symmetrical Triangle from 12/11 through 31/1.

Symmetrical triangles are generally considered neutral, (where ascending triangles are bullish, and descending triangles are bearish). From a time perspective, triangles are usually considered to be intermediate patterns. Usually, it takes longer than a month to form a triangle, and seldom will a triangle last longer than three months. Converging trendlines of support and resistance gives the triangle pattern its distinctive shape. This occurs because the trading action gets tighter and tighter until the market breaks out and this can be in either direction. Buyers and sellers find themselves in a period where they are not sure where the market is headed. Their uncertainty is marked by their actions of buying and selling sooner, making the pattern increasingly tighter as it moves across the chart. As the range between the peaks and troughs marking the progression of price narrows, the trendlines meet at the "apex," located at the right of the chart. The "base" of the triangle is the vertical line at the left of the chart which measures the vertical height of the pattern. To achieve the reliability for which the triangle is well known, technical analysts ALWAYS  wait for a clear breakout of one of the trendlines defining the triangle. Bulkowski advises that, in general, the failure rate for triangles drops significantly if the investor waits for a valid breakout and, once that breakout occurs, the pattern proves strongly reliable. The second alternative is to wait for a move above the validation line which I have entered on the chart.

As you see on my chart there are plenty of warning signs of the impending fall. You will notice that todays candle is sitting on the second support line, and we will have to see on Monday whether or not this support is broken. The next support lines are at 3.50, 3.16, 3.06, 2.93, 2.67. Until we see Mondays candle it is a complete guess at the moment as to where the price is heading.  (This is why it is so important to have a stop loss in place).

If you have any more questions, please do not hesitate to ask.

Andrew

PHY.gif

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