Mid Week Pit Stop #12

Surprisingly there is a hindenburg omen video on cnbc.com. Not really a new thing actually if you have been reading the blog. Just for those with slightly more interest in it, you can view it from here.

Back to Technical Analysis

Well, I have touched on Head and Shoulders with pit stop #10, side track a little with pit stop #11 because I really want to mention it as quickly as possible. Here again, I will introduce new patterns. I am not a very technical guy so to speak. As much as I use them, I disagree with a good part of technical analysis actually especially the indicators.

Triangles

By right, there are three types of triangle patterns. They are ascending triangles, descending triangles and symmetrical triangle. I don't really like symmetrical triangle because they are not biased to any side, which means that you have to be really careful.

There are many pictures that you can find on the internet for triangles in technical analysis. I like this picture because of the thumb up icon over there. Ascending triangle and descending triangle are just opposite in nature.

What does this chart show actually?

1. Triangles tell you about specific price behaviour and possible mentality of the crowd. First you have a stock that is going on an uptrend. It faces some sort of resistance or profit taking or whatever reason you can find for it falling down. Reasons do not matter actually. It's the behaviour that matters.

2. After falling quite significantly, it goes back up to test the previous resistance point but to no avail. However, it does not fall as much as before this time round.

3. Buying forces are gathering fast, possibly anxious, to buy into the stock that they miss before at a cheaper price.

4. The process many repeats a few more times with buyers buying at a higher price each time it falls from the resistance point (thus forming the lower rising trendline).

5. Finally, the stock breaks its resistance and shoots immediately as more buyers come in.

6. In my own fuzzy logic words, triangle is similar to punching a wooden block. A soft wood of course. After punching it many times, the wood gets weaker and finally when it comes down to the final punch, your punch will go through and not just stop at the position of the wood itself. Sounds fuzzy isn't it?

If you are interested to read more into triangles, you can read from here. The website provides detailed explanation (lengthy).

Again, some posts will be short in order to balance those super long post. I have one long post coming up, a very audacious post that I will be working on with the mailman. I don't think that we can rush it out for this weekend post so it is most likely to be for next week post.


Do not buy the hype from Wall St. and the press that stocks always go up. There are long periods when stocks do nothing and other investments are better.

Jim Rogers