I recently traded two stocks that showed nice patterns, but were behaving really strange shortly after their breakouts. The first one is BSY: As you can see it formed a Bullish Pennant. Then it broke out on huge volume, indicating institutions are buying big time. I bought the stock and shortly afterwards I was already 4% in profit. Perfect. However during the day a big sell of set in and the stock tanked. It even tested the lower border of the pennant so my stop loss got triggered. The second stock was similar. ZIM developed a nice cup pattern: So either a handle would form or the stock would breakout right away resulting in a cup without handle. As you can see, on the 25th the stock broke out strongly triggering my buy stop. But just like BSY over the day the huge breakout was sold off again. For the time being it looks like the handle is formed after all. Still I'm not sure how to make sense of it all. I know situations where pivot points are tested and sold off again. Usually it happens with small price advances and low volume, but not with strong price moves on big volume. To me it seems, the same institutions that buying in were selling out on the same day again. Does anyone know a candle stick pattern that matches here?
First of all, we don't see the sell-off of the stocks. Second, we don't see the TF so I assume this is daily? From what you have posted, it looks like the "breakout" is due to the dividend declaration perhaps on both of the stocks as indicated by "D" on the "X" axis and the sell-off is perhaps due to the ex-dividend adjustment? And since you didn't show the sell-off of the stocks, so I can't deduce any candlestick patterns pertaining to the sell-off.
talk about BSY. 1. there is no bullish pennant. 2. it didn't break out on huge volume, indicating institutions are not buying big time. 3. for the past few weeks, bsy has been moving around 55 to 67. so it will continue to move in that region till don't- know- when -it- will- not. 4. now look at the historical chart. breakout strategies don't work most of the time. so don't blindly use the breakout strategy. 5. You did swing trading on a difficult-to-trade stock. There are other easier-to-trade stocks. 6 ..... I didn't look into your ZIM trade. I am sure there were lots of mistakes.
Institutions do not buy at the top. They sell at the top. Buy at the bottom. This is contrary to market phases which apply to every stock in the stockmarket, around 10,000 stocks in all. There is also, a strong resistance area on the BSY stockchart. It must overcome that strong resistance overhead to be able to go higher.
Maybe I'm completely off here. Can you help me understand? I'm quite new to technical analysis. So I browsed through my watchlist trying to spot one of the more popular patterns. With BSY I assumed there's a bullish pennant like this To my eye BSY looks very similar. At least until the 25th when the stock stoped behaving: Can you tell me where I'm wrong here?
That is what the book says. If you follow the book, you will find that it wouldn't work most of the time Go develop your own holy grail Reminder. I have already mentioned all the key points earlier. You seems to ignore it
I'm not ignoring it. I just try to understand one point at a time. Please be patient with me. So you're saying it is a bullish pennant according to the book, but it still won't work most of the time because of the other factors. Got it. You said: "2. it didn't break out on huge volume, indicating institutions are not buying big time." On the 25th the volume was 2.5 times the volume of the 50 day moving average. According to what I've read when volume is a multitude of the average, it indicates instituions are buying. Is that also wrong? What would be a good indicator for instituional buying?