Nightly Update - Patterns within Patterns

Many of our portfolio stocks are in the same pattern on each time frame: the monthly, the weekly, and the daily. This repetition of pattern in multiple time frames is known as a fractal. Consequently, we may start off playing the daily pattern, but at the same time we are also playing the weekly and monthly pattern. Therefore, we are taking profits at different resistance areas and buying back at support based on these fractals. There may also be patterns within patterns in a chart; i.e.: a diamond bottom within an ascending triangle. Multiple patterns cause not only the patterns to change but the price targets and time frames to change as well. Unfortunately, there are times if someone misses just one update with a sell alert ,they may unwittingly ride a stock back to original entry or thereabouts. I want to avoid that mishap for my subscribers by creating a portfolio table based on time frames as well as price target. This will cater well to different types of traders that have entered the portfolio stocks with different price target time frames in mind. I will go over the upcoming changes to the portfolio table in more detail tomorrow.


S&P 500 SPRs ETF (SPY)
The daily chart clearly illustrates that the SPY sliced through its former resistance at $128.93 within the past 5 days with ease. It rallied quickly up to make a new 52 week high at $130.95. With this fast price action, we will now consolidate for a few days and perhaps retest the breakout line. This pullback on light volume should form a nice bull flag which looks likely if you look at the stochastics Today was a very volatile day although the market was flat.

The Tokyo Nikkei Average (NIKK)
Earlier, I mentioned that charts can contain pattern(s) within a pattern. The NIKK daily chart is an example of this occurrence. As you can see on the daily chart, the NIKK has a diamond pattern contained within a larger ascending triangle pattern. Actually, it is a breakout from the all time down trend line. The NIKK is a perfect example of a diamond continuation breakout. These patterns within patterns cause me to raise price target because the wave count changes. Another interesting point about multiple patterns is that they increase volatility. All indicators and oscillators are bullish. The PPO is strong and the stochastics are bull flagging. (If you want to play the strength in the NIKK, I would recommend that you look at the Japan i shares ETF. )

The Biotech Holders ETF - BBH
On the daily chart of the BBH you can see that it has been correcting in a 4 month downtrend channel. The BBH is the laggard biotech index because of it's main components: AMGN and DNA. As you can see, yesterday the BBH had a nice move up and broke out of it's downtrend channel. As with the NIKK the BBH contains multiple patterns. The BBH could be in any of these patterns: Reverse Symmetrical Triangle bottom or a diamond bottom or a reverse head and shoulders bottom. Sometimes there can be as many as 6 to 8 patterns on a chart. Naturally, we just want to play the pattern that the most participants are following. Today the BBH closed up 0.20% at $199.36

The Computer Hardware Index- Amex (HWI)
Along with the NIKK and BBH, the HWI contains a pattern within a pattern. The HWI contains a bullish wedge within an ascending triangle. When multiple patterns occur, the end result is often confusion among the majority of participants. Today, the HWI is breaking out of a bull flag. It closed up 0.43% at 218.41. Once again, all indicators and oscillators are bullish, implying further gains in price.