| Stock Chart Patterns Measure Distance Two |
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| Sunday, January 7, 2007 |
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Weekend Update - Chart Patterns Measure Distance Part 2- ZOLL, EPIQ, EOG & SU Charts
What type of Trader are you?
Patterns within Patterns
On the last update I discussed how Chart Patterns measure distance and I used the TS chart as an example. I would like to continue the same theme in this update. However, we will look at different charts.
What type of Trader are you?
I just want to go back to what I was discussing in the previous update, Chart Patterns Measure Distance Part 1. Every trader has critical choices to make before they trade. There is no way that a trader could buy every stock that comes out in the pattern scan, every stock that I highlight or mention, or every stock that hits the portfolio table. It is impossible to do that. Therefore, as a trader you will have some choices to make. These choices are important to make, because they will determine how you will trade a stock and what type of trader you are. As a trader, you first have to determine what type of trader you are. Are you a day trader, short term trader, swing trader, or an investor? These are also trading styles. Once you determine what your trading style is then you can pick stocks that match the time frame to your trading style or strategy. Finally, you then have to determine what type of gains you are seeking with each trade. Are you looking to profit 10%,15% or 20% with each trade? Or are you willing to invest for longer term profits of perhaps 50% to 100%? Are you going to trade fast moving / high-beta stocks or slower moving stocks? These are some of the decisions that you need to reach before you place a trade. This is an integral part of creating a trading plan for yourself. It is helpful to approach trading like a business, and that is by having a trading style and strategy planned out ahead of time so that you can reach you goals consistently.
Chart Patterns within Patterns
It is a common occurrence to see multiple patterns in a chart. This is what is called a pattern within a pattern. For example, you might see a diamond bottom within an ascending triangle on a chart. Multiple patterns cause the patterns themselves to change. This occurs over a period of time as the price changes and moves. Consequently the price targets and time frames change as well. When a pattern within a pattern occurs, we may start off by just playing the daily pattern, but at the same time we are also playing the weekly and monthly pattern in order to reach our longer term price objective. Zoll is a good example of a chart that has a pattern that contains another pattern. When I first updated Zoll in September, I used the daily chart to show that it had a bull flag pattern within a larger ascending triangle pattern. Zoll is also in a fractal pattern. Then we have other patterns that were identified on the monthly charts. Let's look at EPIQ.
Epiq Systems, Inc. - (EPIQ) - Monthly Chart - Ascending Triangle Pattern - Business Software Services - Optionable
EPIQ is a bankruptcy software play. In order to see EPIQ's big or longer term picture , you would want to look at the monthly chart. As you can see, EPIQ has been trading in a slim Jim rectangle pattern for the past 6 years, and it is now forming a large bullish ascending triangle pattern. Now, if you were to look at the daily chart of EPIQ, you would see that it was forming a wedge within the monthly ascending triangle. The wedge is a smaller pattern within the larger ascending triangle pattern. Furthermore, EPIQ has completed it's wave 3 to wave 4 downtrend. It is now in a wave 4 to wave 5 uptrend. It is important to know that wave 5 is typically a slow moving wave. Accordingly, it will take time (i.e. months) for EPIQ to complete it's move to price target (wave 5), which is also resistance. As you can see, resistance is quite far off at $25.00. It could go as high as $35.00.
For those of you that entered EPIQ around the $14.00 range, you would want to know if this trade matches your trading style and trading objectives. Does this time frame match your trading criteria? Is it a short term trade or a longer term trade for you? Are you playing the monthly chart, weekly chart, daily chart, or 60 minute chart? If you are playing the monthly chart, for example, you would not want to by short term options on it. It is very important to trade the correct vehicle for the chart, it should match the stock chart's time frame. If you are trading the monthly chart do not watch the 60 minute chart. As I have already stated, EPIQ is in a large ascending triangle on the monthly chart, it has been up 20% and also down 10% /15% since it was added to the portfolio table. Short term traders have already sold EPIQ with 10% to 15% gains because that matches their trading style. Swing traders and investors, on the other hand, are still holding EPIQ from the entry alert because that matches their trading plan.
Zoll Medical Corp. - (ZOLL) - Monthly Chart - Ascending Triangle Pattern - Front Runner stock - Not Optionable
Zoll was originally updated on the monthly chart. It is in a fractal in every single time frame. I brought up this chart weeks before we bought it. Zoll has been up as high as 70%, right now it is up 60+%. I personally think that it is getting frothy on the daily. Resistance is in the $60's, which is where ZOLL is trading now. Am I going to send out an alert just because it is up 60% before it reaches target? Absolutely not. This is where you have to decide weather you are playing the daily ascending triangle, the weekly ascending or the monthly ascending triangle. Again, this is where knowing what type of trader you are helps you achieve consistent profits. Are you swing trading this stock or investing in it? Should you be taking partial profits along the way up to price target? Yes! There is something known as money management. You alone are responsible for managing your money. I can alert you when to take profits, but that is all that I can do. I cannot micro manage the portfolio picks for you. You have to invest the time in yourself to know what type of trader you are, and how the updates apply to your trading strategy.
EOG Resources, Inc. - (EOG) - Weekly Chart- Ascending Triangle Pattern - Energy Sector - Optionable
EOG also presents itself as a value play with a P/E of 11.47. Again, as with the aforementioned stocks, EOG is also in an ascending triangle pattern. Within that triangle pattern you can see a secondary continuation diamond pattern. Furthermore you can see that it has broken the downtrend line and it is now backtesting the break out line. EOG is also a lower risk investor trade, meaning that it is meant to be held for 6+ months or until price target is reached at $95.00. This is a macro play and the same thing applies to SU.
Sunocor Energy, Inc - (SU) - Monthly Chart- Ascending Triangle Pattern - Energy Sector - Optionable
SU is also in an ascending triangle pattern on the Monthly chart. It has completed it's wave 3 to wave 4 correction, and it has held it's uptrend line. SU still needs to take out it's intermediate term downtrend line. SU has been under heavy accumulation since the end of September. SU is also a lower risk investor trade, meaning that it is meant to be held for 6 months or until price target is reached at $100.00. Please take a minute to look at the similarities between the Zoll chart and the SU chart. You can have a downtrending channel within a larger geometrical pattern.
My point to this update is that some things take practice. Technical analysis and trading take practice. I want to make sure that when you are playing a stock please make sure that when you are playing the time frame that is best suited for the vehicle you are trading the stock with. Trading vehicles are: the underlying equity, futures, options, or an option on future. Try to have patience and wait for the stocks to fulfill their patterns and reach their price objectives. There is no rush.
Edited by Daisy
Andrea Victoria Friend aka Daisy
Editorial Assistant for Trending123.com
daisy@trending123.com
CHART PATTERNS MEASURE DISTANCE
ZOLL
EPIQ--MONTHLY
ZOLL--MONTHLY
EOG--WEEKLY
SU--MONTHLY
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