Hi everyone, I have been studying technical analysis for a year or so, and consider myself still a beginner. Just wanted some advice on the following chart. This is a 1 year chart of Bank of China in the HK exchange. As the lines do not meet, this cannot be considered a symmetrical triangle formation yet, right? If the lines do meet, can I categorize this formation as a symmetrical triangle? Or is there any prerequisite that this chart is missing? Thank you in advance for any advice/opinion given.
Andrew First welcome I understand the studying TA part â been there same as you Also understand the attempting to label it part â also been there May I respectfully suggest it doesnât really matter what itâs called⦠Hereâs what you really have; Context â But it is defined enough, or iow â specific enough context â to tradeâ¦. Assuming youâre working to become a trader â hereâs the most important questions you must always answer; How would you frame up a trade â based on the context youâve created â while risking only what your account can tolerate (the appropriate amount youâre willing to lose) And to this endâ¦. Which direction would you enter Where (specific price) would you exit for a loss Where (specific price) would you exit and take profit --------------------------------------------------------------------------------------------------------------------------------------------------------------- Of lesser import â but only very slightly â Are you day tradingâ¦, swing tradingâ¦, or investing⦠---------------------------------------------------------------------------------------------------------------------------------------------------------------- This is not a slam Sir â but personally I would not trade that context in either 3 modes (day, swing, or invest) ------------------------------------------------------------------------------------------------------------------------------------------------------------- Now if you find all the above useless â then yeah you could call it a symmetrical triangle â the top and bottom lines are both angled â and the lines will meet eventually if you extrapolate them out to the right It may ALSO be a flag or a pennant â but like I said â doesnât really matter whatâs itâs called/ labeled in the bigger picture RN
Form your triangle by getting rid of the Nov top and the Feb bottom and instead using the remaining points - you will have a nice a-b-c-d-e. I don't have the data but the above seems like a decent shot. Try it. note: your lower line could be used as just a trendline.
No, that's very helpful, thank you. I understand what you're trying to say completely, and I know that is one area I will need to expand further into eventually. Having said that, do you know of any useful reading that talks about constructing or framing a trade, as you mentioned above? Specifically, I am looking towards ones that talk about trend following, investing or swing trading. Are there any helpful material that could offer concrete explanations as to this area? Lastly, out of curiosity, what are the factors from this chart that deter you away from investing in this stock? Thank you.
No, that's very helpful, thank you. I understand what you're trying to say completely, and I know that is one area I will need to expand further into eventually. Andrew, You are Very Welcome Iâm going to answer this post in two parts Part 1 Having said that, do you know of any useful reading that talks about constructing or framing a trade, as you mentioned above? Specifically, I am looking towards ones that talk about trend following, investing or swing trading. ================================================================= No â Iâve never seen one central repository where everything is outlined, besides any book on the subject would be from the authorâs eye/ view point⦠you need to develop your eye, and your view point â this is where screen time on SIM pays dividends Here are a few thoughts in shotgun fashion on how to draw lines to frame up trades â Iâll ask you to organize them in a form that makes sense to you ------------------------------------------------------------------------------------------------------------------ Straight lines are your friend â albeit straight horizontal lines, or straight diagonal lines Channels are you friend, both horizontal and diagonal Once you get good at channels you can work on wedges, pennants, and flags, and triangles - if you decide ------------------------------------------------------------------------------------------------------------------- First start out drawing your lines on existing trends â get good at it⦠then switch to drawing line on trends that have not yet formed â but appear to be starting to form Practice drawing lines â over and over and over⦠till you can see trend lines without drawing them.. ---------------------------------------------------------------------------------------------------------------- When drawing your lines try framing up / characterizing price (with your lines) â so price is able to show you how itâs acting Do not draw your lines so price appears the way you think it should, or the way you want it to appear I realize on the surface these sentences do not make sense â but this is the difference between a trained and untrained eye â with practice these sentences will make sense, and money --------------------------------------------------------------------------------------------------------------- Guidelines for drawing lines Uptrend = rising lows (aka higher lows) Down trend = lowering highs (aka lower highs) Once you draw either the uptrend or down trend line â copy that line exactly (same slope) then drag it to the opposite side of PA â forming a channel In and uptrend donât worry about the upper line encompassing all the PA (price is rising over time â and sometimes price gets motivated) In a down trend donât worry about the lower line encompassing all the PA (price is decreasing over time â and sometimes price gets motivated) For an uptrend line â two touches (not breaks) of price on the bottom line â make it valid, then copy that line and drag it to the other side of PA â the other side requires only one touch (remember the top line is identical in slope) Same for a down trend â two touches of price on the top line â make it valid, then copy and drag that line it to the other side of PA (again identical slope) This is important â if the line/ channel holds â it is a trend â for as long as that line/ channel holds⦠When that line / channel no longer holds â price it NOT in that trend â now it may be in a different trend (direction), or the same trend (direction) with different momentum/ velocity (aka slope) In an uptrend â as price decreases slope â it is losing momentum and could reverseâ¦, or start moving sideways â then reverse⦠or not In a down trend â as price decreases slope â it is losing momentum and could reverseâ¦, or start moving sideways â then reverse⦠or not In steep trends â it takes energy to maintain them â that energy will not last (2007 was not energy â it was pure fear â that didnât last either) ------------------------------------------------------------------------------------------------------------------ Again practice drawing lines â then watching how / if the lines youâve drawn captures the essence of priceâs action Remember⦠Price will never respect your lines, (price does not know your lines even exist) â your job is to draw lines that capture priceâs behavior ================================================================ Are there any helpful material that could offer concrete explanations as to this area? Please reference aboveâ¦. I would also invite you to also post examples â after youâve practiced â and we can discuss Lines are only one part of the tools youâll need â but they are an important part as they will provide you specific context in an environment totally devoid of context (save for the context of buying and selling of course) btw the other tools Iâm referring too are not necessarily âindicatorsâ â that is totally your call whether you use indicators or not You may decide to forgo indicators and use price â so then the next step would be to learn how to read price⦠then possibly add volume and learn how to read it⦠The choices of what to place on your chart is endless â and completely yours Part 2 to followâ¦
Lastly, out of curiosity, what are the factors from this chart that deter you away from investing in this stock? Part 2 Several ways to answer this question Let me say I run seperate investment account, swing account, and day trading account I enter positions with my investment account based largely on FA, and the philosophy â buy stuff that are must haves (food/ gold/ silver/ energy)⦠(aside unfortunately I think one day water will also fall into this category) Anyway Banks do not fall into this category I also enter investment positions thinking long term â so I donât want to have to deal with them frequently (a set and forget philosophy if you will) -------------------------------------------------------------------------------------------------------------------------------------------------------- On the flip side⦠I day trade purely on PA⦠I donât give a crap about FAâ¦, if what Iâm trading is a necessityâ¦, or anything else for that matter â my only focus is what price is doing that day -------------------------------------------------------------------------------------------------------------------------------------------------------------- So letâs separate what you have and analyze from a FA stand point, then a PA stand point Is Chinaâs economy doing good â yes somewhat - but⦠And granted the data coming out of China is not always 100% reliable â but near as I can determine â China; Is doing a lot of infrastructure improvements, but not a lot of manufacturing (even though recent reports contradict this - we'll see) Is trying to make a play on rare earth metals and some AG Their currency valuation is tenuous â and contentious May or may not attempt a run on the dollar, Holds a lot of US debt On a different note Potential conflict may be looming â and China may or may not be involved in some way (this is looking a little further out) All that said â there is nothing compelling me to invest in BOC at this time⦠============================================================================================ Now from a PA view of your chart Price is in a range (the very last 8 bars or so) â and until it breaks one way or the other â with some conviction and possibly a pullback test that holds â Iâm sitting on my hands So either way Sir Iâm on the sidelines with this one for now RN