For me, Technical Analysis is about reading pictures of historical price and volume patterns. Charts are series of trends and consolidations. There are a fairly small number of chart patterns that consolidations will follow. The key then is to identify where to buy as the stock is attempting to break out of the consolidation – within the context of whether or not volume is confirming the breakout.
Here is a chart of Cree Research (CREE). Cree has been a leading stock with strong Earnings Growth. The pattern in the Blue Circle is a classic pullback. Cree broke out of the pattern on two big days. It then sat around at the previous high ($33-ish) for a few days, before gapping up and running to $39.
The current consolidation looks identical to the one in the Blue Circle. I had stops in to buy it at $37 - $37.10 (Green Arrow). The buyers showed up on Friday and Cree pooped +5.36%! It may now sit around at the old highs again before deciding what to do after earnings are released.
Here is how CREE looked on the 1-minute chart. Look at the move it made in the first few minutes of trading on Friday! I wish every trade worked so well…
Charts aren’t voodoo. They are used to better time entries and identify support levels.
No comments:
Post a Comment