| 4 More Setups Forming Ascending Traingles (ADM, HES, PTR, CEO) |
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| February 11, 2008 |
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An Ascending Continuation Triangle is considered a bullish signal. It indicates a possible continuation of the current uptrend.
An Ascending Continuation Triangle shows two converging trendlines. The lower trendline is rising and the upper trendline is horizontal.
- This pattern occurs because the lows are moving increasingly higher but the highs are maintaining a constant price level.
- The pattern will have two highs and two lows, all touching the trendlines.
- This pattern is confirmed when the price breaks out of the triangle formation to close above the upper trendline.
Volume is an important factor to consider. Typically, volume follows a reliable pattern: volume should diminish as the price swings back and forth between an increasingly narrow range of highs and lows. However, when breakout occurs, there should be a noticeable increase in volume. If this volume picture is not clear, investors should be cautious about decisions based on this Triangle.
Following are important characteristics about this pattern.
Occurrence of a Breakout
Technical analysts pay close attention to how long the Triangle takes to develop to its apex. The general rule is that prices should break out - clearly penetrate one of the trendlines - somewhere between three-quarters and two-thirds of the horizontal width of the formation. The break out, in other words, should occur well before the pattern reaches the apex of the Triangle. The closer the breakout occurs to the apex the less reliable the formation.
Duration of the Triangle
The Triangle is a relatively short-term pattern. It may take between one and three months to form.
Shape of Triangle
The horizontal top trendline need not be completely horizontal but it should be close to horizontal.
Volume
Investors should see volume decreasing as the pattern progresses toward the apex of the Triangle. At breakout, however, there should be a noticeable increase in volume.
Duration of the Pattern
Consider the duration of the pattern and its relationship to your trading time horizons. The duration of the pattern is considered to be an indicator of the duration of the influence of this pattern. The longer the pattern the longer it will take for the price to move to the target price. The shorter the pattern the sooner the price move. If you are considering a short-term trading opportunity, look for a pattern with a short duration. If you are considering a longer-term trading opportunity, look for a pattern with a longer duration.
Target Price
The target price provides an important indication about the potential price move that this pattern indicates. Consider whether the target price for this pattern is sufficient to provide adequate returns after your costs (such as commissions) have been taken into account. A good rule of thumb is that the target price must indicate a potential return of greater than 5% before a pattern should be considered useful. However you must consider the current price and the volume of shares you intend to trade. Also, check that the target price has not already been achieved.
Inbound Trend
The inbound trend is an important characteristic of the pattern. A shallow inbound trend may indicate a period of consolidation before the price move indicated by the pattern begins. Look for an inbound trend that is longer than the duration of the pattern. A good rule of thumb is that the inbound trend should be at least two times the duration of the pattern.
Support and Resistance
Look for a region of support at the lowest low and a line of resistance at the top of the Triangle.
Moving Average
Compare prices to the 200 day Moving Average. When prices are close to or touch the 200 day Moving Average this signal is considered stronger.
Volume
A strong volume spike on the day of the pattern confirmation is a strong indicator in support of the potential for this pattern. The volume spike should be significantly above the average of the volume for the duration of the pattern. In addition, the volume during the duration of the pattern should be declining on average.
No Volume Spike on Breakout
The lack of a volume spike on the day of the pattern confirmation is an indication that this pattern may not be reliable. In addition, if the volume has remained constant, or was increasing, over the duration of the pattern, then this pattern should be considered less reliable.
Short Inbound Trend
An inbound trend that is significantly shorter than the pattern duration is an indication that this pattern should be considered less reliable.
This pattern with its increasingly higher lows and constant highs indicates that buyers are more aggressive than sellers. The pattern forms because of a supply of shares is available at a fixed price. When the supply depletes, the shares quickly breakout from the top trendline and move higher.
Archer Daniels Midland Company procures, transports, stores, processes, and merchandises agricultural commodities and products primarily in the United States. It operates in three segments: Oilseeds Processing, Corn Processing, and Agricultural Services. The Oilseeds Processing segment involves in processing oilseeds, such as soybeans, cottonseed, sunflower seeds, canola, peanuts, and flaxseed into vegetable oils and meals principally for the food and feed industries. It also sells salad oils, partially refined oil, oilseed meals, cottonseed flour, and cotton cellulose pulp. The Corn Processing segment engages in wet milling and dry milling corn operations. It produces syrup, starch, glucose, dextrose, and sweeteners; corn gluten feed and meal, and distiller's grains; corn germ; and alcohol, amino acids, and other food and feed ingredients. This segment also produces astaxanthin, a product used in aquaculture, as well as citric and lactic acids, lactates, sorbitol, and xanthan gum, which are used in various food and industrial products. The Agricultural Services segment engages in buying, storing, cleaning, and transporting agricultural commodities, such as oilseeds, corn, wheat, milo, oats, and barley, and reselling these commodities to the agricultural processing industry. The company also produces cocoa liquor, cocoa butter, cocoa powder, chocolate, and various compounds; wheat starch and gluten; edible soy protein products, including soy flour, soy grits, soy protein concentrates, and soy isolates; natural source vitamin E, tocopherol antioxidants, and phytosterols; and soy isoflavones. In addition, it processes and distributes edible beans for use as a food ingredient, as well as formula feeds, and animal health and nutrition products. The company has joint ventures with Alimenta (U.S.A.), Inc., Gruma S.A. de C.V., and Metabolix. Archer Daniels Midland Company was founded in 1898 and is based in Decatur, Illinois.
CNOOC Limited, together with its subsidiaries, engages in the exploration, development, production, and sale of crude oil, natural gas, and other petroleum products primarily in China. The company has four oil production areas offshore China, which include Bohai Bay, western south China Sea, eastern south China Sea, and east China Sea, as well as offshore oil facilities in Indonesia and certain upstream assets in regions, such as Africa and Australia. As of December 31, 2007, it had net proved reserves of approximately 2.6 billion barrels-of-oil equivalent. The company was founded in 1982 and is based in Central, Hong Kong. CNOOC Limited is a subsidiary of China National Offshore Oil Corporation.
Hess Corporation, together with its subsidiaries, engages in the exploration, development, production, purchase, transportation, and sale of crude oil and natural gas worldwide. It operates in two segments, Exploration and Production (E&P) and Marketing and Refining (M&R). The E&P segment explores for, develops, produces, purchases, transports, and sells crude oil and natural gas. Its exploration and production activities take place principally in Algeria, Australia, Azerbaijan, Brazil, Denmark, Egypt, Equatorial Guinea, Gabon, Ghana, Indonesia, Libya, Malaysia, Norway, Russia, Thailand, the United Kingdom, and the United States. The M&R segment manufactures, purchases, transports, trades, and markets refined petroleum products, natural gas, and electricity. It owns 50% of a refinery joint venture in the United States Virgin Islands, and another refining facility, terminals, and retail gasoline stations on the East Coast of the United States. The company markets refined petroleum products on the East Coast of the United States to the motoring public, wholesale distributors, industrial and commercial users, other petroleum companies, governmental agencies, and public utilities. It also markets natural gas and electricity to utilities and other industrial and commercial customers. As of December 31, 2007, the company operated 1,371 HESS gasoline stations, including stations owned by the WilcoHess joint venture. In addition, Hess Corporation also has a 92.5% interest in Hess LNG, which is pursuing investments in liquefied natural gas terminals and related supply, trading, and marketing opportunities; and has a 50% voting interest in a consolidated partnership that trades energy commodities and derivatives. The company was founded in 1920 and is based in New York, New York.
PetroChina Company Limited, together with its subsidiaries, engages in petroleum and natural gas related activities in the People's Republic of China. It operates in four segments: Exploration and Production, Refining and Marketing, Chemicals and Marketing, and Natural Gas and Pipeline. The Exploration and Production segment engages in the exploration, development, production, and sale of crude oil and natural gas. The Refining and Marketing segment involves in refining, transportation, storage, and marketing of crude oil and petroleum products. The Chemicals and Marketing segment produces and sells basic petrochemical products, derivative petrochemical products, and other chemical products. The Natural Gas and Pipeline segment transmits natural gas, crude oil, and refined products, as well as sells natural gas. As of December 31, 2006, the company had estimated proved reserves of approximately 11,618 million barrels of crude oil and approximately 53,469.2 billion cubic feet of natural gas, as well as operated 18,207 units of service stations. It owned and operated 20,590 kilometers of natural gas pipeline networks, 9,620 kilometers of crude oil pipeline, and 2,413 kilometers of pipeline for refined products. The company was founded in 1988 and is headquartered in Beijing, China.
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