Dow About to Break Out?
- Thread starter Corso482
- Start date
Quote from Minime:
I would call it a rising obtuse triangle with a fat lady soon to sing on top. The fat chick is in the process of getting pushed up the hill now.
Or she may just take a nap in the wings. The more gradual the wedge, the less likely that anything dramatic will happen, though this sort of thing is never a lock.
--Db
Quote from Sanity:
looks like a rising wedge to me too, its my understanding that they usually break at the more sharply sloped line. so maybe a break down?
Yeah the rising wedge is supposed to be bearish... still the fact that it is so deep into the apex as drawn on the chart pretty much negates its predictability. Its value is more as a bearish continuation than a reversal. Again, I am just paraphrasing that point, but my experience has been the same. Classically, and you see classically all the time, the price should break 2/3 - 3/4 of the way into the pattern, if the pattern is going to work.
A cool thing about triangles that fail this way is the coiling effect.. which is the result of decreased volatility, which implies...... pending increased volatility.
At the risk of inducing the pattern-bashers to jump in, another way to look at this same chart is to put it on close only, or the line chart... however you call it, and set a ray at the lows of Jan and Jan 8, clone that line and attach it to the high of Jan 6. Doing so, one could make an argument for a channel, or rising flag, still a bearish pattern.
I know, I know, if I draw enough lines I could probably form a circle!!!
I know, I know, if I draw enough lines I could probably form a circle!!!
Quote from Sanity:
looks like a rising wedge to me too, its my understanding that they usually break at the more sharply sloped line. so maybe a break down?
True. However, the more gradual the angle, up or down, the less likely a dramatic break. Plus, the longer it stays in the pattern, the less likely a breakout or breakdown and the more likely a lengthy congestion/consolidation period.
The reason why a rising wedge is bearish is that bulls are unable to push price up to the same extent that bears are able to push it down (if they were, it would be a rising channel). Therefore, since the bulls don't have the numbers, the higher probability move is either sideways or down. Reverse for a falling wedge.
--Db