6 edit: And just to make sure my post is clear, expect a breakout next week, not right now.
Yesterday I speculated on potential patterns forming. It looks like we have a winner! While it is not 100% until the end of the trading day I’m 90% certain that we are seeing a pennant, or what is commonly known as a symmetrical triangle.
See those white lines? If the market continues within that range, then a breakout is inevitable. While I’m certain of it, I can not guarantee if the breakout will be in an up or down direction. As far as the highest statistical probability the breakout will be upwards and will continue roughly 100 points from the breakout point for the rest of the month and into December.
The trick is to keep an eye on the market. Betting prematurely up or down can be painful, but missing the breakout is embarrassing.
If this pattern continues do not expect me to post anything until the breakout happens, most likely next week. If something odd happens today or tomorrow I’ll report as much.
Yesterday I recommended buying today, and I still recommend it. The market is currently going down. I recommend buying when $SPX is roughly 1232. I expect it to get a bit lower than 1232, but just in case it is better to bet a couple of points off of the bottom than to miss it entirely. And just like what I said yesterday, if $SPX goes below 1220 and you’re long, I recommend selling as a safety precaution. You will not lose much and that way if the impossible happens (a breakout downwards) you will be ready for it.
And like always, please comment. I like hearing others opinions.
~Danielle
6 Responses to “Expect a Breakout! ^_^”
toreador
This triangle can be a bear flag right? imo, we’r heading down. if we break on the upside, I will fade it.
bunny
It can be a bear flag, but it is probably around a 12% chance, if even that.
With that being said, if you think there will be a downward breakout, then it is best to not go short until the beginning of the breakout, but instead hold cash and wait. Why? Because statistically, with around a one in ten chance of a breakout downwards, the risk is too high. Also, even with that ~12% chance the market will still probably jump up to ~1065 before breaking out lower. Breaking lower tomorrow or the day after that is insignificant.. probably ~2%.
Also, usually with a pennant the stock will run along the line (usually outside of the pennant slightly) for a couple of days, even for weeks sometimes, before breaking out in that direction. Currently it is running against the lower line, but above the lower line, not slightly below the lower line. This is also another potential bull flag and implies that like a spring being coiled up, the market will jump up overnight probably tonight, or tomorrow night.
An example of what I’mt talking about is here. Particularly the 13th to the 20th is what to look for. As you can see, the potential to jump down is there, and tomorrow will most likely make it obvious which direction it will jump towards next week.
Sorry for my babbling. I’m not the best at explaining this type of stuff. Hopefully I’ve helped at least a little.
toreador
Makes sense. I agree with you on the first part, those pennants/wedges/triangles are very tricky and I really don’t like going short them when they go under the lower support line. I was not clear in my message, sorry. Usually, If I’m bearish on a longer timeframe, if this triangle breaks up on the upside, I like to fade it.If it breaks on the downside I like to short when it comes back to test the support lower trend-line, never on the first move. I trade currency and the fake moves are numerous on this market, ty for the 12%, I didn’t know.
bunny
The 12% estimate comes from my own analysis software I wrote and is only for this particular situation. The 2% is just a guess.
Take it with a grain of salt; 2¢.
Berserker
Just wanted to say thanks for posting – keep posting. As to what you are saying, it’d be nice to have a bit more of your rationale.
bunny
You’re welcome! 😀