Depending on your skills in technical analysis, you might be able to spot some very clear patterns in this price action.
Possibly, there is a bull flag.
Or, perhaps it is heading into a double top pattern? Maybe there’s an ascending triangle on the far end? It could be something else entirely.
Given the pattern that you see, you’ll likely have some sentiment regarding the upcoming movements of the stock. If it’s a bull flag, then you’re looking to buy before it moves higher. How much higher? That’s not always clear Moreover, what precisely constitutes a bull flag versus another pattern? That often depends on the trader you ask.
Trading based on charts patterns — often overlain with various indicators — is the hallmark of technical analysis. Traders in this area will discuss head-and-shoulder patterns, support and resistance levels, cup-and-handles, Fibonacci retracements, and may use a variety of technical indicators like MACD or RSI. Based on the patterns in the charts and the confluence of indicators, traders will have certain forecasts, price targets, and levels for the market or their preferred instrument to trade.
While it all sounds very precise and sterile, I can’t help but feel like I’m watching two mediums divine the weather from entrails when I listen to technical traders debate chart patterns.
The basic trouble with technical analysis is that it is a visual discipline. Traders read charts to pull patterns out and make trades, making it much more of an art than a science. In the best case scenarios, traders will have some strict rules they adhere to on entries, stops, targets, and so forth, but more…