This Week’s Trading Proves How Powerful This Chart Is

This is a syndicated repost courtesy of Money Morning. To view original, click here. Reposted with permission.

Share!Tweet about this on TwitterShare on FacebookShare on LinkedInEmail this to someonePrint this page

Earlier this week, we saw the markets in a compression pattern, a triangle. That’s when I made this prediction:

“A break and close below the 2,140 zone will bring our ‘Line in the Sand’ back into play.”

My prediction came true – that’s exactly what happened.

That’s what makes technical analysis of charts like this so powerful…

We’re Out of the Triangle, Back on the “Line”

trading

This most recent market activity breaks us out of a short-term triangle pattern and transitions us into a slightly longer-term pattern that features our “Line in the Sand” more prominently.

On this chart below, our “Line in the Sand” is a price zone that was a resistance level – a “ceiling” for stocks – from November 2015 through July 2016. Price then broke through decisively in July and since then, this same price zone has proved to be a key support level – a “floor” for stock prices.

trading pattern

Late last week, on Oct. 13, we were socked with very disappointing monthly export data out of China. Rather than going up – a symptom of the “bad news is good news” syndrome gripping the markets – traders in fact reacted negatively to this report because it is an indication of declining global economic health.

That drove prices down in trading, but by the end of the day Thursday, our “Line in the Sand” had held and price was rebounding.

Incidentally, this “Line in the Sand” put our Stealth Profits Trader Micron Tech options play within inches of its first profit target. It really is that powerful.

This Line Is Going to Be Even More Important Going Forward

The last item to note on the chart above is the descending triangle that is forming on the right side of the chart.  It has our “Line in the Sand” as its flat lower boundary and a descending trend line that forms the top of the triangle.

Descending triangles are classically bearish patterns, making our “Line in the Sand” an even more significant level to monitor.

A break of that key zone (Line in the Sand) will bring the Brexit lows from the end of June into play.

On the flip side, a close or two above the down sloping trend line will set the market up for more upside. And be aware that broken bearish patterns make the potential for an extended bull move much more probable.

 

To get full access to all Money Morning content, click here

About Money Morning: Money Morning gives you access to a team of ten market experts with more than 250 years of combined investing experience – for free. Our experts – who have appeared on FOXBusiness, CNBC, NPR, and BloombergTV – deliver daily investing tips and stock picks, provide analysis with actions to take, and answer your biggest market questions. Our goal is to help our millions of e-newsletter subscribers and Moneymorning.com visitors become smarter, more confident investors.

Disclaimer: © 2016 Money Morning and Money Map Press. All Rights Reserved. Protected by copyright of the United States and international treaties. Any reproduction, copying, or redistribution (electronic or otherwise, including the world wide web), of content from this webpage, in whole or in part, is strictly prohibited without the express written permission of Money Morning. 16 W. Madison St. Baltimore, MD, 21201.

 

The post This Week’s Trading Proves How Powerful This Chart Is appeared first on Money Morning – We Make Investing Profitable.

Wall Street Examiner Disclosure:Lee Adler, The Wall Street Examiner reposts third party content with the permission of the publisher. I am a contractor for Money Map Press, publisher of Money Morning, Sure Money, and other information products. I curate posts here on the basis of whether they represent an interesting and logical point of view, that may or may not agree with my own views. Some of the content includes the original publisher's promotional messages. In some cases I receive promotional consideration on a contingent basis, when paid subscriptions result. The opinions expressed in these reposts are not those of the Wall Street Examiner or Lee Adler, unless authored by me, under my byline. No endorsement of third party content is either expressed or implied by posting the content. Do your own due diligence when considering the offerings of information providers.

Leave a Reply